Iowa SBA Loan Application: What You Need to Know
Tips to Avoid an SBA Loan Rejection
When applying for a loan guaranteed by the Small Business Administration (SBA), there are a number of things that can go wrong. The good news is you can learn from lending rejections and find ways to improve your chances. Even better, you can learn from other peoples’ mistakes! Here are some of the things that have tripped up other business owners in Iowa in the past when applying for a SBA loan.
A low credit score makes it hard to find a willing lender. Credit is an indicator of how well you’ve managed debt in the past, and lenders are looking for people with a great track record of making payments on time. If your credit score is below the 600-680 range you probably won’t qualify for a SBA loan, and you’ll have to raise your credit score or look at other options.
This is a big one. If you can’t clearly articulate how you plan to pay the loan back, you won’t get approved. Maybe you had a good credit score and seemed to meet all the requirements, but you were still rejected. Think about how you can explain your plans in a new light to the next lender. Do you have the necessary experience and know-how to run a good business? How will the loan help your business grow and thrive? How much money will you be making a few months, a year, and a few years from now? And how can you explain that to a lender in a way that will put you and your business in the best light?
“Patience, organization and a detailed business plan are the keys to a successful SBA outcome. Take the time to really fine-tune your presentation packet with your banker to fully understand what the institution is looking for."
– Chris Diebel, Bubba’s Southern Comforts
Make sure you have enough cash flow to pay back the loan, and make sure that the lender knows that. Also, if you have to put up collateral, ensure that the equipment, real estate, or whatever you put up is really worth as much as you think it is. When using equipment as collateral, make sure it won’t depreciate so quickly as to be insufficient before the loan is paid off. Lenders won’t agree to a loan if they aren’t sure you can pay it back or if the collateral won’t cover the cost of the loan.
If you haven’t had sufficient time to prove your business’s profitability, you may be considered too much of a risk. It can be possible to get a loan with SBA assistance if you have all the other boxes checked: great credit, personal funds and collateral, and a solid business plan.
Unfortunately, it’s hard to get approved for a loan if your company is already in trouble. This is why it’s important to always look ahead and try to anticipate needs before they become full-blown disasters.
If you are an Iowa business owner looking to expand your liquidity, Lincoln Savings Bank is here to help. Call us, contact us online, or stop by any of our branches for a free, no obligation SBA loan consultation today.
Lincoln Savings Bank, Member FDIC
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