How to Prep Your Finances Before Applying for an SBA Loan

August 31, 2018

Prepping for an SBA loan is a lot like prepping for a date. 

You want to put your best foot forward and let lenders know pursuing you is definitely worth their time. Your finances should be in the best possible shape before the application is submitted—attention to detail is key.

Securing an SBA loan can require lots of paperwork and long windows of what may feel like endless waiting, but the benefits are well worth it. Low down payments, reasonable interest rates, and longer repayment terms make this loan, essentially, the holy grail of business loans.

And it’s true that nearly everyone wants an SBA loan, which may make it feel as though the odds are not in your favor. And though there are some factors you can’t really control (such as your time in business, for example) there are a few steps you can do before you apply to simplify the process and increase your chances of getting accepted for an SBA loan.

To reduce nerve-wracking waiting time, it’s a good idea to gather the documents you know your lender will want before you start your SBA application. Having bank statements, tax returns, profit and loss forms, and balance sheets for the last three years is a smart way to be prepared and work smarter, not harder. You should also prepare a projected financial statement.

Preparing personal credit score

When it comes to borrowing money of any kind for your business, you can expect your personal credit score to become very important. Unless you’ve been in business for a very long time—and your business credit score is nearly perfect, your personal credit will definitely come into play when applying for an SBA loan.

Though there are no hard and fast rule, a score of 800 is considered an exceptional FICO, but anything over 620 is a great place to be when applying for a business loan. If you’re trending lower, you may want to spend a few months doing a bit of credit score maintenance.

You can improve your credit score by doing things like opening a new line of credit, paying off credit card debt, and staying well under your credit limit. Once you’ve got your credit score up, it’s safe to push forward and begin the SBA application. Remember—the higher you can get your credit score, the better shape your business will be in.

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By the time you apply for an SBA loan, you are probably well acquainted with all aspects of your personal and business credit score. What you may not know is that there’s a score called an SBSS score and it’s not something you can necessarily gain access to.

SBSS stands for Small Business Scoring Service. When you’re a small business owner, lenders typically look at both you and your business. This score simplifies the process for lenders, allowing them to see your financial history—both personal and business—all at once. Unfortunately, there’s no way to predict exactly how FICO tallies an SBSS score.

Despite not knowing the exact formula, we know that they take into account your personal and business credit history, time in business, assets, liabilities, your business’s financial data, revenue, liens, and cash flow. These factors are examined and put through a formula that gives lenders a solid picture of who you are as an entrepreneur. It’s a more thorough representation than looking at your business score and personal score separately—and it changes based on your business’s size. As long as you stay on top of your credit score, SBSS is nothing to worry about.

Time in Business

There are a lot of factors that go into your odds of getting approved for an SBA loan that are somewhat within your control. Unfortunately, your time in business is not one of them. The longer you’ve been established, the more likely you are to get approved.

At Fundera, we’ve seen that a company that’s been in business for at least four years has a better chance of receiving an SBA loan. That being said, most lenders say two years or more in business should increase your chances of securing a loan. The amount of time you’ve been established matters because it gives the lender a solid history of your finances, revenue, and lending habits. They want to know that you’re going to be able to pay off the debt in a responsible fashion and having a solid history to prove that is always positive. If a traditional term loan is out of reach due to your time in business, a business credit card, line of credit or even a personal loan may be a good alternative.


When a lender decides whether or not to approve your loan, most want to know if you’re profitable. Similar to your time in business, you may not have a ton of control over this, but there are a few ways to make a strong case for your company without clear profit.

At Fundera, we’ve noticed businesses that have an annual revenue of $180k are more likely to get approved (but remember, this is just an average and not a hard line). If you’re a new company currently operating at a loss, you may want to consider going another route—such as applying for a business credit card or a microloan. This way, your company has time to start generating revenue and your chances of getting approved for an SBA loan increase.

Know which SBA program to apply for

Now that you know what to prepare and how to improve your chances, it’s time to take a look at the different types of SBA loans and decide which option and repayment plan works best for you. There are six options to choose from when it comes to SBA loans, and not all of them will be right for your business. To start, here are the three most popular options:

  • The Microloan Program
  • The 7(a) Loan Program
  • The CDC/504 Loan Program

The microloan program is for businesses with small capital needs. They cap out at $50,000 with a repayment plan of up to six years with and an interest rate of 6.5% to 13%. This loan can be used for almost any business need except for purchasing real estate or refinancing debt.

The 7(a) Loan Program is the most popular SBA loan type for small business. It’s the right move for a company with basic financial need—like business acquisitions or broadening working capital. With this, you get up to $5,000,000 in a loan amount for general business financing needs and can expect a repayment plan of between 5 to 25 years with an interest rate from Prime +2.25% to Prime +4.75%.

Finally, the CDC/504 Loan Program is a good choice for a business that wants to purchase land, buildings, or equipment. With this option, you’ll get up to $5.5 million in a loan amount and a repayment plan of 10 to 20 years, with an average interest rate around 5%.

Patience is key

There’s a reason so many small business owners clammer for SBA loans; there are a ton of perks that will benefit your company both immediately and in the long run. The trade-off is that it’s often a slow process and that requires a lot of legwork throughout the application. If you need access to funds quickly, you’ll want to look at other options.

The SBA should be one of your top choices for a loan. And yes, SBA loans are difficult to get—and there’s a ton of work that goes into getting them. But their low cost makes it a worthwhile endeavor. And, luckily, with these tips—you’ll increase your chances of getting approved.

Businesses looking at new loans and overall financial decisions should look at financial services to help them manage their business problems.


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