Small Business Loan Application Questions Small Business Loan Application Questions

Small Business Loan Application Questions

When you start a small business loan application, preparation is key to qualify and get funded fast. Although small business lenders vary, there are standard questions you’ll be asked. Have your answers and documentation ready to move the loan process forward smoothly and quickly. 

1) How long have you been in business? About half of U.S. small businesses shut down within their first 5 years. If you’ve passed that benchmark, lenders know that you’re on track for growth. For a SmartBiz SBA loan, you must have two or more years in business. There are many options for funding a start up or younger business but you’ll get the best rates and terms the longer your business has been around.

2) Do you have steady cash flow? This question is obvious – will you be able to make loan payments? Financial and bank statements will reveal your ability to manage your cash flow. Cash flow statements tell lenders how much money you have available at any given time and if that flow is steady enough to take on debt.

3) How you plan to use your funds? Use of funds allowances and restrictions vary from lender to lender. For a SmartBiz SBA loan, there are several ways to use loan proceeds to fuel growth including:

  • Working capital – Defined as the difference between current assets and current liabilities, working capital funds the day-to-day operations of your small business.
  • Business expansion – You’ve survived the roller coaster of starting a business. Now what? If you’re ready for the next step, there are business expansion strategies you can fund with proceeds from a loan. These include opening another location, hiring new employees, implementing marketing programs and more.
  • Equipment Financing – Equipment can range from an x-ray machine to a used van to computers and more. As an example, “The Tree Guy” is a SmartBiz customer that used SBA loan proceeds to buy new equipment. With that equipment and a few new hires, he was able to expand his business to an additional location.
  • Debt Refinancing A popular way to use funds from a low-cost, long-term loan is to refinance existing high interest debt. SmartBiz customer Milton Martinez owns Triple D Towing in Texas. He says, “By getting rid of the two small loans I’m saving $15,000 – $18,000 dollars. That’s money I can put back into growing my business or into savings.”
  • Business Acquisition According to the SBA, there are many favorable aspects to buying an existing business such as drastic reduction in startup costs. The specifics of business acquisition will vary from lender to lender so do your research.

The SBA has a comprehensive list of documents you might need to produce as you move through the application process here: Gather the Info You’ll Need. Paperwork to have at the ready includes bank statements, legal documents and tax returns.

Taking on debt might make you nervous. That’s understandable as debt is usually seen as something to overcome, not embrace. But before you back away, check out our blog post on how debt can be great for growth: The Benefits of Long-Term Debt for Your Small Business. If you’re ready to seek funds, an SBA loan is the best bet with low rates, long terms and low monthly payments. Visit SmartBiz today and discover in about five minutes if you’re qualified for an SBA loan. Use the promo code “blog” and receive $500 off of your closing costs.

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  1. One of the main attractions of this type of finance is that it is available almost immediately. A lender would determine the amount of money that could be given to you based on your credit score and the information that you furnish. You can expect the funds to be transferred to your bank account within a few days at most.

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