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An Expert Explains: Key Steps to Get an SBA Loan

Last updated on October 23, 2019 at 10:13 am

How do you get an SBA loan (that’s short for Small Business Administration loan)? For starters, small business owners who are considering applying for an SBA loan should be aware that two loans, the SBA 7(a) and the SBA 504, are the ones most commonly requested.

Additionally, there are two other programs that focus on providing start-ups with access to capital.

Types of SBA Loans

While both traditional loan types are popular, the SBA 7(a) is more universally requested because it is designed to help business owners make purchases such as furniture and fixtures, make leasehold improvements or even acquire an existing business.

The SBA 504 loan, however, is more typically used to make more significant investments. This includes the need to purchase or to make improvements to land or existing buildings, to purchase ground-up construction commercial real estate or even to purchase heavy equipment or machinery to operate a business.

Steps to Get an SBA Loan

First step: No matter which loan is most appropriate for your circumstances, it is my recommendation that you save time when applying for an SBA loan by pre-determining your eligibility.

Borrower guidelines from the SBA specifically require:

  1. A 680+ credit score for primary business owners
  2. A minimum 10% down payment if the loan is used to purchase a business or commercial real estate
  3. At least two years or more in business (see below for exceptions)
  4. Providing business or personal collateral, while not mandated, makes it easier to be approved
  5. 51% owner-occupied is required for a commercial real estate loan
  6. No record of delinquencies or defaults on existing debt obligations to the United States government, such as school loans

If you seek an SBA 7(a) loan, there are additional requirements that must be addressed:

  1. Meet the SBA definition of a small business which usually has two key criteria – less than 500 employees and less than $7.5m in annual sales
  2. Be in an eligible industry sector
  3. Be a for-profit company doing business in, or seeking to do business in, the United States (unlike the SBA 504 requirement of establishing a 2+ year history in business, start-ups do not need to meet the 2+ year expectation to obtain a SBA 7(a) loan**)
  4. Consider alternative options, such as personal assets, before seeking an SBA loan
  5. Demonstrate that the loan will support a strong business purpose; i.e., project future financial sustainability
  6. Create or retain jobs that are aligned with SBA’s objectives
  7. Meet SBA public policy goals

Along with the SBA 504 and 7(a), there are two additional SBA programs for start-up companies:

  • The Small Business Administration Community Advantage Loan program – available since 2011 for new and existing businesses to provide loans under $250,000 to finance a startup company or expand an existing small business or buy real estate, giving these new business owners access to capital in underserved communities.
  • The Small Business Administration Microloan Program – provides direct loans and grants to eligible nonprofit microlendersso that they can provide loans to business-based training and technical assistance to start- ups, newly established and growing small business concerns.

Second step: Identify a Small Business Development Center to help you apply for the loan. (The SBA doesn’t directly deliver loans; you will need to work with an SBA lender.)  In New Jersey, there are more than 20 SBDC Regional Centers, each attached to a college or university in counties throughout the state. This NJ network is an accredited member of America’s Small Business Development Centers. The entire list of locations can be found at

Third step: Assemble all the paperwork needed to apply for the loan. The more documentation you have prepared in advance and the more organized you are, the quicker the process will be. To be sure you are ready for the process, have these handy:

  1. Loan amount requested
  2. Detailed allocation of funds
  3. Business financial statement
  4. Year-To-Date Profit & Loss Statement and Balance Sheet
  5. Proof of Ownership and Business Certificate (or license)
  6. Business and personal tax returns for the last two years
  7. Owner’s personal financial statement and resume

Depending on what type of loan you are applying for, you will be asked to produce different information. For example, if you are seeking a loan to buy an existing business, you will need financial information from the business to be acquired, as well as a purchase agreement along with other legal papers. If, on the other hand, you are buying commercial real estate, you will need substantiating information such as property appraisals, real estate purchase agreement and rent rolls and leases.

Once you have submitted the application and all documentation, you will probably receive a response from the lender called a “Letter of Intent (LOI)” which will outline both the amount of the loan you qualify for and what you may expect regarding terms and rates for the loan.

If you have questions about getting an SBA loan based on your own unique circumstance, feel free to reach out to me at

Meet Our Expert

Ken Bagner is a Member in Charge of Sobel & Co. LLC. He is a member of the American Institute of Certified Public Accountants and the New Jersey Society of Certified Public Accountants. Plymouth Rock Assurance in NJ is proud to partner with NJSCPA to bring you valuable tips about your financial health. Qualified members of the NJSCPA can receive a discount on their car insurance through Plymouth Rock Assurance in New Jersey.

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