Understand the role your assets and credit play when applying for SBA loans

Jessica SarterSmall Business Lending

Applying for one of the small business loan programs overseen by the United States Small Business Administration (SBA) is a process that shouldn't be taken lightly. You'll need to prove to lenders that you have the financial stability to support your obligations as a business owner, so they can rest assured that you'll pay them back according to the terms of the loan you're requesting.

Lenders look closely at factors including your amount of working capital, the assets you can put up as collateral and whether or not you run your business effectively with existing resources. Your personal credit history will also be a determining factor, because you (along with all your business' owners) submit a personal financial statement with your SBA loan application.

When you apply for SBA-managed small business loans, it's essential to demonstrate that your current business model is effective and secure. If your enterprise seems financially unstable, it'll be extremely difficult to get approved for a loan. 

At the time of application, your small business should be paying off all debts in a timely fashion (including personal debts) and not spending more than it's earning for any extended period of time. To enhance your application, consider preparing a cash flow projection illustrating how your lender's loan will help your business effectively meet future expenses.

It's also important to prove the strength of your current working capital and collateral. The difference between your current liquid assets and financial obligations should be a positive amount. If your cash flow is negative, a potential SBA loan lender will likely view your business as an investment liability.

To meet collateral requirements, which vary by lender, be ready to put up your business' assets – property, land, accounts receivable and more – as a sign of good faith. If your company is lacking assets, you might need to use your home or other personal property as collateral.

Finally, keep in mind that lenders will want to determine how you manage your business before they give you a loan. They might look at your debt-to-worth ratio, working capital and the rates at which you collect debt from others (and settle your own debts), along with how you perform in delivering products or services to your customers.

Regardless of whether you're a small business owner or want to become one, BoeFly.com can help you access the best small business loans.  BoeFly.com gives business borrowers secure access to more than 1,500 lenders – without having to go from bank to bank.