FLORIDA SMALL BUSINESS DEVELOPMENT CENTER AT IRSC
credit data as well as information from a business credit report, and
financial data. The SBA requires a minimum score of 155 on a scale
of 0-300 though many lenders require a score of 160 or above.
And speaking of numbers, make sure you’re keeping up with
taxes.
“Producing fair and reasonable profits should always be the
primary goal for small business operations, please ensure the business
taxes reflect these profits,” says Tom Kindred, regional director
of the Florida Small Business Development Center at Indian River
State College. “Lenders will focus on business profits as they evaluate
the business’s ability to satisfy debt service requirements.”
4. Ask for Help
Entrepreneurs tend to try to do it all themselves, but if that
describes you, know you don’t have to go it alone in applying for
your SBA loan.
Chris Petropoulos of General Auto Recycling in Tiverton, Rhode
Island, took a commercial loan for an employee stock ownership
plan for $5 million. He quickly realized he would need to provide
a lot of reports and documents for the loan. That’s why he recommends
bringing a financial expert on to streamline your application
process.
“A commercial financial consultant walked me through the
process,” he says. “I would not recommend doing this without a
representative who has experience with this type of loan.”
There are a variety of professionals who can help. These include:
• An SBDC Small Business Development Center such the Florida
SBDC at Indian River State College adviser. Professionals from this
organization can provide free assistance to entrepreneurs.
•A certified public accountant, enrolled agent or accounting
professional who works with small business owners. They can help
make sure your financials are well-organized and lender-ready.
5. Invest in Key Person Insurance
Insurance might be the last thing on your mind when applying
for an SBA loan, but it could be the tool that ensures that your business
thrives, no matter what might happen to you.
Sa El, co-founder of Simply Insurance, says that one of the requirements
of an SBA loan is a life insurance policy that is greater than or
equal to the amount of your loan and that you have a term length
that is greater than or equal to the term of your loan.
This requirement applies to loans where, per SBA guidelines, the
lender determines the viability of the business is tied to an individual
or individuals. In those situations, the lender must require
life insurance. Getting a life insurance policy on yourself, however,
doesn’t provide the same benefits that a key person policy does.
“Getting a loan through the SBA is a great idea for any small
business; however, it is critical that you have a plan for paying it
back,” he said. ”If you have a key person that your business couldn’t
survive without, then you need to get a key person insurance
policy. Without this, you open your business and yourself up for
financial ruin, especially if you can’t pay back the loan.”
You should also consider an updated life insurance policy.
Lenders want to be sure their loans will be paid back in the event
of your death. They do that by having you buy life insurance that
assigns the death benefit to them. But loan applicants, in their
scramble to form a business plan and arrange financing, typically
fail to notice the life insurance requirement until closing time is
right around the corner. v
This article originally appeared on Nav.com.
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