SBA does not collect this data. This document is a tool to assist you in starting or expanding a business.    Privacy

Whether you are applying for 7(a), Micro, Pre-Qualification, Express or a traditional bank loan, there are certain factors that improve your ability to obtain financing.

Do you have a good personal credit history?    Yes       No

A good personal credit history is one of the most important factors in identifying borrowers who will repay their commercial loans. Many loan programs require perfect personal credit in order to qualify.

Obtain a recent credit report and review it carefully. In Wisconsin, starting March 1, 2005, you can obtain a free credit file disclosure at AnnualCreditReport. This will not include your credit score but you may purchase it along with your free credit file through the website.

The Federal Trade Commission puts out a brochure called "Fair Credit Reporting Act" . The publication explains the fair-credit reporting act and tells consumers how to challenge inaccurate or incomplete information in their credit reports. It also lists the three major national credit bureaus.

If you have had a bankruptcy in the past 10 years, or have slow payments, collections, or judgments, it may be difficult to obtain financing at this time. If a poor credit history can be explained by a particular incident, supply information on the situation and how you attempted to repair the past credit problem. If you have had a consistent credit problem, you will need to "repair" your credit history. Contact a credit and debt counseling service for assistance.

Have you filed and paid your personal and/or business income taxes? 
 Yes       No

Lenders and government loan programs require an individual and small business to have met their tax obligations for both filing and paying taxes. For SBA guaranteed loans, a tax verification of business income tax returns is obtained from the IRS before a loan is closed.

Can you demonstrate your business has the ability to repay a loan?  
 Yes       No

(For existing businesses) If the business is profitable, are profits sufficient to repay the loan? If a business is not profitable, it becomes very important to prove how it will be profitable in the near future in order to pay the proposed loan.

(For start-up businesses) It is very important you provide sufficient data on comparable businesses and/or industry statistics to justify your revenue and expense projections. This is a primary part of your business plan. Training sessions and individual counseling can assist you in preparation of your business plan.

Does your business have a positive net worth?    Yes       No

The net worth for existing businesses should be positive. If there are loans from shareholders on the balance sheet and you are able to place the loans on "standby" (not pay the shareholders) while you repay the proposed bank loan, you may consider those loans from shareholders as equity.

Is your business carrying too much debt?    Yes       No

(For existing businesses) Profits for businesses carrying too much debt will be required to pay loans and not be available to increase retained earnings in the business and finance future growth. Therefore lenders and the SBA will review the current level of debt and the level of debt including the proposed loan. Banks often look for a debt to net worth ratio of 4 to 1 or less (total liabilities divided by equity). SBDC counselors can assist you in assessing your debt situation.

Do you have enough capital to start a business?    Yes       No

(For start-up businesses) All SBA loan programs require business owners provide equity for the business. The equity contribution by the owner is an indication of confidence in the business, its future growth and profitability. Some SBA loans require only a 10% capital injection, while others require 20-30% and in some cases more.

Do you have collateral to secure a business loan?    Yes       No

Business and personal assets can be considered collateral. The SBA will consider a secondary source of repayment, in some cases. For collateral purposes, most assets are valued at less than face value. The value of assets for collateral purposes depends on the type of asset. Although the SBA loan program guidelines state collateral cannot be the only factor leading to a denial. Our policy states that loans must be 100% secured by available collateral. A refusal to provide collateral, if deemed necessary, will cause the loan to be declined.

Are you willing to personally guarantee a loan?    Yes       No

All owners of 20% or more of the business are asked to provide a personal guarantee in order to obtain an SBA guaranteed loan.

Does your business have managers and advisors capable of managing your business profitably?     Yes       No

(For existing businesses) As businesses expand, they need more sophisticated management as it relates to strategic planning, marketing, recordkeeping, inventory control, and personnel. If there is a part of your business where you need assistance, we strongly recommend that you attend one of the SBDC's entrepreneurial training classes, meet with a SBDC counselor or contact one of the many SCORE offices.

Do you have experience in running your own business?    Yes       No

(For start-up businesses) For a new business, it is important the business owner demonstrate he/she has industry and/or entrepreneurial experience. If you have never owned or operated a small business, we again, strongly recommend you attend one of the SBDC's entrepreneurial training classes or call a SCORE counselor.

On our Wisconsin Calendar, there are many opportunities for classes and training from a variety of sources. Some are for a small fee while others are free.

HOW TO APPLY FOR AN SBA GUARANTEED LOAN

Questions your Banker may Ask

The applicant prepares a detailed Business Plan including, but not limited to the following:
History and/or description of the business, as well as, a discussion of the market, competition, and any other significant factors.

• Resume for management, including education and work experience.
  

Once you have a written business plan, you are now ready to approach the money markets to try to finance your business.

• Putting the Loan Proposal together
• Are you applying for a Micro loan, a SBA 7(a) loan or a traditional bank loan? In either case, similar information is required to complete a loan package.
  Pick up the Loan Package Checklist.

An existing business must:

• Furnish signed and dated historical financial information; Profit and Loss Statements for the last three years or since the business was established, if less than three years, federal income tax returns are acceptable if historical financial statements are not available; and a Balance Sheet 
  
• Furnish a signed and dated Balance Sheet and Profit and Loss Statement no more than 90 days old, with an aging of accounts receivable, payable, and schedule of note balances as of the date of the Balance Sheet.
• Prepare and provide a statement of the amount of the loan requested and the exact purpose for which it will be used.

A new business owner must:

• Furnish a statement of financial need, reflecting how the business will use its equity and the loan proceeds. SBA does not provide 100% financing. New business owners must provide some equity to help finance the proposed business.
• Provide a SBA Form 413, Personal Financial Statement  no more than 90-days old; for each proprietor, each limited partner with 20% or more ownership interest, each general partner, or each stockholder owning 20% or more of the voting stock and each corporate officer, or any other person or entity providing a guaranty for the loan.
• Prepare a detailed projection of earnings (Profit and Loss Statement) for the first year of business operation after the loan is closed. Explain the basis for the projections, describe your market, the price you will charge, sales you anticipate, how product or service will be distributed, and a description of your competition.
• List the collateral to be offered as security for the loan with an estimate of the current market value of each item, as well as, the balance of any existing liens.
  

The applicant is required to take the above material to a lender and request direct financing. If the lender is unable or unwilling to provide the financing directly, the applicant should ask the lender to consider the financing with an SBA guaranty. If the lender has any questions, they are encouraged to contact our Wisconsin SBA Offices at 608/441-5263 or 414/297-3941.

If it is determined that the loan request has merit, subject to SBA’s guaranty, the lender should complete the required credit analysis, review the loan application for completeness and submit the application to SBA, with any other required supporting documents. SBA will review the application, process and approve or decline.

Additional SBA Forms