August 1, 2024 - 2 Min Read
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When going for a startup SBA loan, there are minimum qualifications you must meet in order to be approved. These qualifications are:
Experience: You need experience in the industry you are going into. If you do not have experience, you should be partnering with someone who does, or franchising.
Income: You will need income or savings to support your personal expenses. If you are already earning business revenue, your business should be able to cover its current expenses.
Equity Injection: You will need 5-20% of your project cost to put into your business. A lender does not want to feel like they are the only ones risking money, you will have to risk your money too.
Credit: Some lenders do not have a minimum credit score and some place theirs at 625, 650, etc. One thing is certain, you can still get a startup SBA loan with a low credit score (500s). However, you will still have to show you pay your debts.
Now that we know the main qualifications to get an SBA loan, we also know the opposite of these qualifications will get you denied. But here are some other examples of what can get you declined for a startup SBA loan:
Government Assistance: Being on government assistance is not acceptable income. Only having this will get you denied.
Equity Injection Loan: You cannot borrow money for your equity injection, it must come from your savings account, a retirement account, HELOC, or be gifted to you. Otherwise, you will be denied.
Equity Injection Exposure: You yourself are expected to put in at least 5% of your loan amount with your own money. Grants and gifts can help you but if it’s the only thing you have to contribute, there is a high chance you’ll be denied.
Government Loan Defaults: You cannot have defaulted on a government loan in the past, you will be denied.
Collection Accounts: You cannot have debt collectors after you with no settlement or payment plans, you will be denied.
Open Credit Accounts: You cannot have zero open accounts on your credit report, you will be denied.
Knowing what will get you denied gives you the information needed to strategize around it and ensure your approval.
We have 25 lenders that we work with across the country. We know which ones like your industry, and what they need to see from you to be approved.
To discuss your specific situation and how much you can be approved for in an SBA working capital loan for your business, request your free consult below.
If you need more startup loan help, make sure you check out these articles:
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