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San Diego
Saturday, May 18, 2024

SBA Suggests 10 Tips When Applying for a Business Loan


The saying, “ask and you shall receive,” doesn’t always apply to small-business loans.

No matter how great a business proposal may be, small-business owners and entrepreneurs need to avoid common mistakes when applying for credit to advance their ideas, said Rod Means, district director of the San Diego chapter of Service Corps of Retired Executives. Means is one of 80 or so business retirees in the region who volunteer time to help entrepreneurs and established business people succeed.

Common mistakes range from not understanding what a small-business loan program really is to credit ignorance. Means said people often call their local U.S. Small Business Administration office with stories about being a single parent or orphan or minority and ask what the program can do for them. Sometimes, he said, they mistake it for other social welfare programs to help those less fortunate.

“It’s a really hard thing to explain to people that that just doesn’t exist,” Means said.

Means has owned several oil and petroleum businesses in San Diego since 1970. He said starting any business takes careful preparation.

“If somebody has an idea, they need to have a business plan and the credit and some experience in what it is they want to do,” Means said. “I get a lot of people who create a Web site and pass business cards around at parties and think that’s all it takes to get started. It’s not.”

A “cool www.address” may impress friends, but it won’t do much for a loan officer, Means added.

Another common mistake people make when seeking a loan is to exhaust credit cards beforehand, thinking that once they get a loan, they can pay it all back. That just lowers their credit score and makes it that much more difficult to get a small-business loan, Means said.

Sometimes, even a solid business plan, good credit and plenty of savings isn’t enough. Means recalled the story of one woman who sought counseling with $100,000 in the bank, an impeccable business plan and an idea that everyone thought was a great one. But she needed about twice what she had saved to get started and no expertise in the field. She didn’t get the loan.

The amount a person needs and the type of business they want to go into and its risk are major factors that people don’t always give enough attention to, Means said.

Top-10 Checklist

Score is one of several nonprofit partners of the SBA office in downtown San Diego. Ruben Garcia, district director of that office, shares a top-10 checklist for aspiring and active small-business owners to follow when searching for a loan. The checklist goes as follows:

1. & #8201;Meet with a representative of Score, the Office of Small Business Development Centers or a Women’s Business Center.

2. & #8201;Determine the amount of money needed.

3. & #8201;Obtain personal credit reports from all three credit bureaus: Experian, Equifax and TransUnion. Free credit reports are available annually at

4. & #8201;Correct all erroneous information listed and write letters of explanation for any derogatory information.

5. & #8201;If currently in business, compile three years of business tax returns with all schedules, three years of financial statements as well as three years of personal tax returns with all schedules.

6. & #8201;For startup businesses in existence less than two years, compile three years of personal tax returns with all schedules, one year of monthly business projections and two years of annual business projections.

7. & #8201;Gather management resumes of key personnel.

8. & #8201;Speak to your own bank first about an SBA loan (if the bank is an SBA lender) to determine the bank’s interest in making the loan.

9. & #8201;Speak with at least two other lenders to determine the best terms and interest rate available for your business.

10. & #8201;Organize and prepare all relevant information to the business (business plan, financial statements, tax returns, licenses, etc.).

Jessica Long is a freelance writer based in Escondido.


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