Find out what lenders expect, and let us help you prepare your loan package and get your personal finances in a position to improve your chances of qualifying.

Did you know that most loans for small businesses do not come from banks?  Instead, there are “non-bank” lenders who specialize in lending money to small businesses.  The SCWBC has extensive experience in working with lenders and helping clients find funding for their businesses.

Start-up Loans

In general, the following requirements are what lenders look for when making business loans.  However, every client situation is different.  The more criteria you can meet, the stronger your application will be to a lender.  Note that the following requirements are applicable for SBA guaranteed loans.  Those loans usually have about the same interest rates but allow a much longer term, often twice the repayment time.  If you do not qualify for an SBA guaranteed loan, you may be able to obtain a different type of loan or line of credit.

• Credit History - A lender expects to see a credit score in the 600s or more.  You can obtain your score once a year for free at www.freecreditreport.com.  Some credit problems can be explained to a lender’s satisfaction; however, the following issues will usually disqualify you from SBA loans:  unpaid taxes, unpaid student loans, judgments from a court, or personal bankruptcy.
• Personal Equity - A lender expects the business owners to provide approximately 20% of the total loan amount.  This is one way of assessing your seriousness and commitment to the business.
• Collateral - An SBA loan will usually require the business owners to provide 100% collateral for the loan.  Other types of loans may require the business owners to provide 120% collateral for the loan.  This means that if you are seeking a loan for $50,000, the lender will ask you to provide collateral for $60,000.  Acceptable collateral is usually a house or property.  Up to 30% of the market value of existing equipment and supplies may be considered for collateral.
• Personal Net Worth - A lender will look at your personal net worth to determine if you have too many debts, or an over extension of credit.
• Business Plan - A lender will ask for a completed business plan, to explain the purpose of the business, how the loan will be used, and whether the owners have assessed the sales potential of the market.

All partners who will own at least 20% of the business will have to complete all of the lender’s financial paperwork and will be assessed against the above criteria.

If you are starting a new business, follow our proven four step plan.  You will be trained in how to write a business plan, and can begin analyzing and documenting your funding needs.  Once the business plan is finished, the business coach will work with you one-on-one to assess your credit history, equity, collateral, and personal net worth, and to prepare your loan package for the lender.

Business Expansion Loans

Business expansions generally fall into two categories – an increase in the existing business volume, or an expansion into a completely new product or market area.

If you have been in business at least two years and are seeking funding for an increase in business volume and/or facilities, you usually will not need to complete a business plan.  Instead, you will provide financial statements for your business over the last two years, write a brief executive summary, and complete a Sources and Uses worksheet (see the SCWBC business plan template). 

• The financial statements should show a thriving, profitable business operation. 
• The executive summary should explain why you need the money, what you plan to do with it, how it will help the business, how the business is doing so far, the total amount you need, and why this is the right time to expand.  This can be done in about one-half to one page. 
• The Sources and Uses worksheet itemizes how you intend to spend the loan.

If you are expanding into a completely new product line or market area, you may need a business plan to reflect the new, future state of your business after the expansion.  The business plan will show to the lender that you have done the marketing research and sales projections and assessed the potential for increased sales and a positive cash flow. 

If you are in business but have never written a business plan before, our How to Start Your Business, Step by Step class will show you how to write a business plan; or you may choose to meet with a business coach to discuss your needs.