10 Must-Ask Questions Before Getting an SBA Loan With Your Bank

If you are set on working with your local bank, here is a set of 10 questions from industry insiders that you must ask your bank before committing to the SBA loan application process with them:

1.What percentage of applicants get a loan after starting the application process with you?

2.How many other businesses have you had experience working with in the industry I am pursuing?

3.Are you the one who makes the final loan approval decision? If not, can I get a pre-qualification directly from a credit decision maker?

4.How many SBA loans have you personally closed and funded?

5.Can you give me some recent referrals of clients you worked with?

6.What was the bank’s SBA loan volume in the last SBA fiscal year?What is the bank’s average SBA loan size?

7.How can I be sure that I get the best terms possible if I only submit my loan to you?

8.Do you do a hard-pull of my credit score for pre-qualifications? When is the hard pull done?

9.Will I have “restrictive covenants” in my loan agreement and will I be required to have my business deposit accounts at your bank? Will I be required to have personal accounts with your bank?

10.Will I be able to keep my business credit card accounts open?

YourSBA.com vs Your Bank

Why are we 5x more successful than your local bank?

YourSBA.com was founded to tackle some of the toughest challenges that come with trying to get SBA financing through a bank: piles of paperwork, vague answers, false promises, and lengthy waits, only to find out you won’t be getting the loan you were initially promised and pre-qualified for. At YourSBA.com, we have made significant changes that allow us to be over 95% successful in securing our clients’ loans, compared to the 15% success rate of a bank.

We discussed in detail the difference between applying for an SBA loan with your loan bank compared to applying with YourSBA.com, but here is a brief summary:

•A typical bank has about a 15% success rate after initial pre-qualification for a number of reasons:•banks freely give out pre-qualifications in order to get you off the streets,

•the person issuing the pre-qualification is not the credit decision maker,

•banks have very limited credit boxes,

•and banks leave it to you to prepare your application and convince them to lend to you.

•In contrast, YourSBA.com has made a number of changes that allow us to be nearly 100% successful in securing our clients’ loans after initial pre-qualification:•we only pre-qualify something if we are very confident in our ability to get it done,

•we only work directly with credit decision makers,

•we have partnerships and access to many different credit boxes,

•and we spend a lot of time elegantly preparing your application.

HOW DO I GET STARTED?

YourSBA.com offers a suite of loan calculators for SBA loans and other funding sources here. You can automatically estimate your down payment requirement, monthly loan payments, SBA borrowing limit, and more.

See if you qualify for an SBA loan by taking just a few minutes to give us some basic information here. The pre-approval process takes less than one day and does not require a hard credit pull.

Turning an Idea into a Reality with a Business Capital Loan

Edison had this great idea once about creating a source of light using a filament. He tried a number of different designs and materials, failing a thousand times before finally coming up with the right combination. When asked about that process later in life he said, “I didn’t fail. We now know a thousand ways not to build a light bulb.” Thanks to Edison, we also now know a thousand ways to do it right. He took his idea, got some business capital financing, and ran with it. You can too.

Why You Should Never Give Up When Seeking a New Business Loan

Did your bank turn you down for a loan and cause you to give up on the great idea you had for a new business? That’s pretty weak. It was either a poor idea or you have been listening to the news media and your neighbors about the state of the economy and the difficulties of getting a new business loan. Did you think it was going to be easy? Is it possible that with all of this talk of recession and economic decline that you thought your humble idea would attract support? Hopefully, you did, because there are plenty of other options for finding financing. You just have to know where to look.

Getting Started With a Loan From the Small Business Administration

What it is: These are U.S. government-backed term loans that are available at most banks and commercial lending institutions In any given year, the SBA can guarantee tens of billions of dollars-worth of loans that support tens of thousands of small businesses.

The SBA’s primary lending program -- the 7(a) Loan Program -- guarantees as much as 85 percent of loans up to $150,000 and 75 percent of loans of more than $150,000. The maximum loan amount is $5 million.

Loan terms can last up to 25 years for real estate, up to 10 years for equipment (as long as the equipment is likely to stay useful during that time) and usually up to seven years for working capital. Interest rates are also competitive because the SBA limits the interest rate spread that banks are able to offer on the loans.

Upside: The SBA guarantee gives banks some comfort room to approve loans or allow borrowers to repay loans over a longer period of time. You might want to consider an SBA loan if you are looking for a loan with a longer term and lower payments -- or have loan application barriers related to inadequate collateral or limited operating history.

Downside: Even though the SBA has tried to make it better, the time-consuming paperwork and red tape surrounding SBA loans is legendary. You might move mountains and still not prove that you have the cash flow required for a 7(a). One potential solution might be to find a bank participating in the SBA Express program, which promises a 36-hour turnaround in return for only guaranteeing half of a loan’s value. The maximum loan amount of $350,000 is also a fraction of the 7(a).

How to get it: Large U.S. banks such as San Francisco-based Wells Fargo and Minneapolis-based U.S. Bank are also some of the most active SBA lenders.

However, it might be worth it to check out local community banks with a focus on business lending. Such banks are a good bet in general for businesses financing because they have more leeway when it comes to approving loans, and their officers can be a wellspring of business financing advice.

Related: How Community Banks Are Wooing Small-Business Customers

Want to find a bank with a niche in SBA lending? You can find out which area banks have the highest SBA loan volume by doing a search on the SBA website.

While shopping around among banks, ask them if they belong to the SBA’s Preferred Lenders Program, in which the SBA delegates much of the decision making and loan servicing to banks that have shown themselves proficient in processing SBA-guaranteed loans. Such banks will have more SBA loan expertise, and should hopefully be able to better navigate the paperwork with you.

Related: A Cluster of Clusters: Where the SBA Is Investing in Regional Economies

While 7(a) is the SBA’s primary loan program, the agency supports other types of small business financing:

The CDC/504 Program provides long-term, fixed-rate financing for businesses acquiring new facilities or modernizing existing locations. The SBA designates particular nonprofits as Certified Development Companies (CDCs) that are able to provide CDC/504 loans -- entirely guaranteed by the SBA -- for 40 percent of project costs. The limit on the SBA’s portion is $5 million. Private sector lenders finance half of the cost of the project, with the business kicking in 10 percent out of pocket.