Are the SBA Loan Requirements for Existing Businesses Too Stringent?

If you’re a small business owner looking for financing, one of the first places you’re likely to look is the U.S. Small Business Administration. It’s a government agency designed to facilitate loans for businesses–they don’t provide the money themselves, but they do connect businesses with third parties and venture capital firms who might be interested in financing the business. It seems like exactly what a business in need of funding would be looking for, but of course it’s not quite that simple. While an SBA loan for an existing business would seem to be a natural fit, in practice it ends up being far more difficult than it should be to obtain funds through the SBA.

The first step to obtaining an SBA loan for an existing business is to determine whether your business is eligible for their programs. If you look at their website, they advise you to first check whether your business qualifies as a small business by their standards. This seems like it’d be simple, but their page has no fewer than 11 articles to go through, featuring tables, charts, guides to determining whether your status is affected by affiliated businesses and subsidiaries, and a “Size Standards Methodology White Paper”. Even if you qualify today, you might not tomorrow–they say on their site that their size requirements are constantly changing.

If your business does qualify as a small business, there are still a number of potential pitfalls. Merchants seeking an SBA loan are expected to demonstrate that they have tried using alternative financial resources (including personal assets) and have a clear need for the loan proceeds. The purpose of the loan must be considered a “sound business purpose” by the SBA. There are any number of reasons your business might be disqualified, and that’s before you’ve even touched an application.

Once you’ve confirmed your business can apply, it’s time to fill out the application. You’ll have to complete at least three forms to apply–the basic application, the Statement of Personal History, and the Personal Financial Statement. On the application, there are a number of questions–some of them will require another form if you answer yes. Did you use an accountant to help with your application? You’ll have to complete Form 159. Will you be using some of the proceeds for construction? That requires Form 601. On top of the forms, you’ll have to provide resumes for each business owner, tax returns (personal and business) for the last three years, a record of any loans you applied for in the past, and the list goes on. This isn’t the paperwork you need to actually receive your money–it’s just what you have to provide up front to find out if they’ll be able to finance your business at all.

If you’re willing to provide all the paperwork and put in all the time to complete the application process, that still doesn’t mean you’ll see a loan anytime soon. Many sources recommend you plan on waiting at least 60 to 90 days before the loan funds, and that’s assuming your paperwork goes through promptly. If your tax return is missing a page or you miss a line on one of the many forms you filled out, that’s going to add yet another delay to the funding process. The SBA’s purpose is sound, but their process is convoluted and complex–it’s easy to be frustrated by constant delays and confusing prerequisites.

At Loanability, our goal is to make things as easy as possible for merchants to get funding. Rather than ask for a stack of forms, financial reports, and personal information, we ask our applicants for just a simple one-page application–once we’ve got that, we can tell you what you qualify for within 24 hours. While an SBA loan might take months to complete, we often fund merchants in just one day. If your business has an immediate need for funds, we’re ready to get those funds to you right away; there’s no need to wait 60 to 90 days for an SBA loan to process. We fund merchants of all sizes, and we think that the reason you need funding is your business and your business alone. Whether you need funds to recover from an emergency, you’re looking to hire additional employees, or you simply want to expand your business, that’s up to you. It’s your money and you know best how to apply it to your business. We’re always working to keep our process straightforward and simple, because we know it’s important to business owners that funds be accessible on short notice.