7 Things to Avoid When Seeking SBA Loans
The Small Business Administration (SBA) is one of the foremost providers of small business loans. They are an excellent resource for businesses that don’t have the ability to secure financing through a traditional lender. However, like any lender, the SBA has certain expectations for the businesses that apply. Getting approved for an SBA loan involves avoiding certain mistakes while showing exceptional organization and team management.
1. Not Having a Good Plan
How you present your business is extremely important for approval. A good business plan will not only show current and projected financial health, but also that you understand where your business stands in the marketplace. Furthermore, it should supply evidence of experience and excellent management. Without this, the lender’s confidence in your business is significantly reduced.
2. Not Being Organized
The SBA’s lenders are known for requiring a significant of paperwork upfront. In addition to the business plan, they also need financial statements, tax forms, resumes, bank statements, credit reports and legal documentation. Make sure that you and your team have the necessary paperwork ready.
3. Not Having a Good Team in Place
Obviously, this is where team management is key. A well-trained team is going to contribute to the productivity and success of the business. The financial health of a business is reliant on skilled employees that can provide services to clients. Poor management of a team leads to apathy and decreased productivity. This can put a significant dent in profits, which can lead to poor cash flow.
4. Poor Cash Flow
Any lender, traditional or alternative, is going to look carefully at your cash flow. After all, it’s basically how you will pay off your loan. Poor cash flow or cash flow analysis could make you ineligible for a loan.
5. High Employee Turnover
If poor team management results in a high employee turnover rate, lenders will see it as a red flag. It shows that your business is not very stable, which hurts your chances of getting approved for a loan.
6. Sloppy Financials
If a lender is unable to clearly understand where your company stands financially, they are unable to adequately perform the due diligence needed for approval. Hiring an experienced bookkeeper or accountant to keep track of financials not only helps you keep organized, but also shows the lender that you are focused on financial health.
7. Not Knowing How to Use the Loan
A lender is not looking to blindly lend money. They want to know why you need the capital and what you will be using it for. Not having a detailed plan of where you will apply the loan funds can hurt the chances of you getting an SBA loan.