Working Capital Loan 101: How It Helps Fuel Business Operations

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As an entrepreneur running a small business, you're likely well aware of the challenges in getting funding and working capital . However, government-backed Small Business Administration (SBA) loans are a fantastic way to secure financing and set your business up for success. Learn all about SBA loan requirements here to pave the way for your business's financial stability. Eligibility Criteria for SBA Loans To qualify for SBA loans, you must first meet certain eligibility criteria established by the federal government and lenders: Business Type: Your business must be officially registered and legally operating as a for-profit entity. Additionally, it must operate in a qualified industry, as certain types of businesses are ineligible for SBA loans. Size: Your business must qualify as a small business according to the SBA's definition. This varies by industry and is generally based on the number of employees or average annual receipts. Place of Operations: Your business has to be located and physically operating in the United States or its territories. Resources Invested: The business must have had equity such as money or time invested in it, including from you, the business owner. Financing Need: You must demonstrate a genuine need for funds and show a sound business purpose for which you plan to use the funds. Character: You cannot be delinquent on any existing government debt obligations. Additionally, individuals with significant ownership in the business must not be facing certain legal proceedings. Underwriting Criteria Once you've determined that your business meets the eligibility criteria, the next step is to undergo the underwriting process. During this process, lenders evaluate various aspects of your personal and business finances to assess your creditworthiness. First, lenders will evaluate your personal credit history, and while there's no set minimum credit score required by the SBA, having a good credit score will increase your chances of approval. Similar to your personal credit, having a solid business credit history is essential for SBA loan approval. Lenders may use the FICO Small Business Scoring Service (SBSS) to assess your business's creditworthiness. In addition, most lenders prefer to work with businesses that have been operational for two or more years. You'll also need to demonstrate strong business finances including annual revenue, cash flow projections, and a manageable level of existing debt. Furthermore, for many SBA loan programs, lenders require collateral to secure loans, typically in the form of real estate, equipment, or inventory. Program-Specific Criteria Depending on the particular program of SBA loan you're applying for, there may be additional requirements specific to it. Here's an overview of some program-specific requirements: SBA 7(a) Loans cover various loan types, each with its own set of requirements. For example, SBA export loans must be used only for export sales activities. SBA 504 Loans are specifically for funding fixed-asset purchases, like large equipment and real estate. Your business must meet certain net income and tangible net worth criteria to qualify. SBA Microloans can be used for various purposes. However, funds cannot be used to pay off existing debts or purchase real estate. Collateral and personal guarantees may be required. SBA Disaster Loans are available to businesses and individuals affected by declared disasters. It’s accessible with specific eligibility criteria based on the type of loan and the nature of the disaster. Should you require any assistance with all the different types of SBA loans, WHITTMORE BRILEY has got your back. We work with more than 20 SBA lenders to bring you personalized solutions. Alternatively, if you require assistance with commercial bridge loans to provide you with quick cash flow while you wait for your SBA loans, we are also ready to help anytime. Just reach out to us online or at 615.949.3341.

Insufficient working capital is often a primary factor contributing to the failure of many small businesses, yet the process of going through different financing options and securing the funds can be overwhelming. However, with the right approach, you can conquer this challenge and access the capital you need to fuel your company’s growth. In this article, we'll break down how to get a small business loan in seven manageable steps. Choose the Appropriate Small Business Loan There are various options available, so consider your business goals and what type of funding suits your needs and financial situation best. Small Business Administration (SBA) loans are partially guaranteed by the government. These loans offer favorable terms through pre-approved financial institutions. Business lines of credit offer low interest rates as well as flexibility for managing day-to-day expenses and unexpected costs. Meanwhile, startup financings like personal loans and business credit cards provide convenience and flexibility but carry risks such as personal liability and limited spending limits. Determine Your Eligibility for a Small Business Loan Factors such as your credit score, business age, and revenue play a significant role in determining whether you qualify for financing. Check your credit score and ensure it meets the requirements set by lenders. Additionally, consider how long your business has been operating and whether it meets the minimum requirements set by different lenders. Evaluate Your Repayment Capacity Determine how much you can afford to repay each month while still covering your business's operational expenses. Review the loan terms carefully and consider factors such as interest rates, repayment schedules, and any additional fees associated with the loan. Assess Your Collateral Collateral can be in the form of financial assets such as property, equipment, or vehicles. Offering collateral can increase your borrowing capacity and potentially lower the interest rates on your loan. Additionally, some lenders may require a personal guarantee. This means you're personally liable for repaying the loan if your business fails to do so. Research Small Business Loan Options and Lenders Take the time to research different loan options and lenders to find the best fit for your business. Consider factors such as interest rates, loan terms, and repayment flexibility. Explore options from online lenders, banks, and nonprofit microlenders to find the most suitable financing solution for your small enterprise. Prepare Your Documentation Gather all the compulsory documents. This may include business and personal tax returns, bank statements, financial statements, and legal documents such as articles of incorporation. Having your documentation prepared in advance can expedite the loan application process and increase your chances of approval. Apply for the Small Business Loan Compare multiple loan offers to find the most favorable terms and Annual Percentage Rate (APR). Complete the application accurately and thoroughly, providing all requested information. Also, be prepared to answer any additional questions or provide further documentation as needed. Get Reliable Small Business Loans with WHITTMORE BRILEY  If you’re looking for a reliable provider of small business loans to grow your company, WHITTMORE BRILEY provides extensive business loan programs that can help. Whether you wish to apply for an SBA loan or you need cash now through commercial bridge loans , our team of finance experts can support you in expanding your business.

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