According to the US Government’s SBA loan (Small Business Administration) website, the SBA “provides a number of financial assistance programs for small businesses that have been specifically designed to meet key financing needs, including debt financing, surety bonds, and equity financing.”
Given this, you might envision walking into a bank, informing the small business loan officer that you’d like to apply for one of these financial assistance programs, and in a reasonably short period of time find yourself with the capital you need to drive your small business onward and upward.
However, as countless small business owners around the country have discovered, the scenario often plays out a bit differently than they expected. Instead of moving forward through the process, many businesses are told right from the start that there is no chance of approval. There are various factors that play into whether or not you might qualify for a SBA loan.
If you’re considering applying for a SBA loan, here are 3 factors that could potentially crush your SBA loan dreams:
What to consider when applying for an SBA Loan
1. You’re a start-up.
In many parts of the country and around the world, being a start-up is a good thing; in fact, it’s exciting, progressive, and innovative. Indeed, there are many stories about high-powered enterprise executives who quit their 7-figure salary a year jobs, so that they could launch their very own start-up.
However, when it comes to SBA loans, “start-up” is a terrifying (hyphenated) word. If your business hasn’t been around for at least a couple of years, then you’ll possibly get the thumbs down.
2. You have a low credit score.
Your credit score is in no way directly related to the viability of your business, your potential to turn a profit, or any of the other factors that will ultimately determine your business success.
However, SBA guidelines tend to be more stringent than some alternative lending options. If your credit score is low – for the SBA, that’s typically anything less than 600 – then you’ll want to broach this topic early in your conversation with the SBA. If this might be an automatic rejection, your time is valuable and going through the process could be a waste of your valuable time.
3. Lack of collateral
If you don’t have the kind of collateral that the banks want, or you DO have it and don’t want to use it to secure the loan, then an SBA loan may not be the right option for you. Without collateral, your SBA loan application likely won’t even get off the ground.
“But wait, there’s more…”
Let’s assume that you aren’t a start-up , and that you also have flawless credit and an abundance of collateral. Does this mean that you can expect to receive your SBA loan funds in the near future? Not necessarily.
Even if you’re the ideal SBA loan candidate, the process for an SBA loan can take several months and even as long as half a year before your application is approved and the funds are available. If you’re looking for quick funds to help keep your business moving forward, although SBA loans have favorable rates, it’s not always the best option for every business.
An alternative to a SBA Loans
At Mulligan Funding, we understand the needs of your business. We don’t depend on government allocated funds to run our operations, so we have the flexibility to review your situation and provide approval and funding much more quickly.
If you feel that an SBA loan may not be the right option for your business, we would love to be considered as your lending partner. Call Mulligan Funding at 855-326-3564 to discuss your financing options today!
The information shared is intended to be used for informational purposes only and you should independently research and verify.
Note: Prior to January 23, 2020, Mulligan Funding operated solely as a direct lender, originating all of its own loans and Merchant Cash Advance contracts. From that date onwards, the majority of funding offered by Mulligan Funding will be by Loans originated by FinWise Bank, a Utah-chartered Bank, pursuant to a Loan Program conducted jointly by Mulligan Funding and FinWise Bank.