If you’re reading this, you probably know that SBA loans are among the best small business financing available. And you can probably imagine that these desirable, government-backed loans aren’t necessarily easy to secure—nor are they necessarily easy to apply for in the first place. With so many forms involved, it can be hard to know which are the most essential SBA forms to focus on.
Yes, all that paperwork can be a burden. But it makes sense from the Small Business Administration’s perspective—SBA loans are highly competitive. And with so many businesses vying for entrance into one of the SBA’s several loan programs, the agency and your intermediary lender simply have the clout to choose which businesses they want to work with. (Remember that both the Small Business Administration guaranteeing the loan and the intermediary lenders actually furnishing the loans need to vet, and approve of, every potential borrower.)
Both institutions have a lot at stake when they issue SBA loans, whose amounts can reach into the millions. So, both the agency and the lender need to be absolutely certain that they’re working with the most trustworthy businesses in the applicant pool. The purpose of the SBA’s lengthy application is for the borrower to prove that they’re one of those trustworthy businesses: Their business is financially stable enough to repay their loan, and they’ll use those funds responsibly. That all translates to a lot of forms to complete, a lot of supporting documents to gather together, and a lot of patience on the applicant’s end.
Best to get a head start on the process, right? Start by organizing the 21 essential SBA forms and documents on this list.
Before You Gather Documentation…
The SBA offers several loan programs, but the SBA 7(a) loan is the most popular—probably because it’s the most flexible. Whereas, for instance, the SBA 504/CDC loan can only be used to acquire fixed assets, like real estate and machinery, borrowers can use 7(a) funds for a range of purposes: to refinance existing debt, buy another business, purchase equipment, hire employees, expand their businesses, or simply as working capital, for example.
So, we’ll be using the SBA 7(a) loan application as our guide here.
But in addition to the standard 7(a) loan program, the SBA 7(a) umbrella encompasses other programs, too. Certain 7(a) loan programs are geared toward small loans; small, expedited loans; expedited loans for export businesses; loans for businesses that need to meet foreign competition; lines of credit; specialized programs for veteran-owned businesses—among other types.
And because nothing in the wild world of the SBA is truly cut and dried, each of these 7(a) loan applications might call for different SBA forms, documents, and proof of eligibility.
Which is all to say: Once you’ve landed on the type of SBA loan you want to apply for, ask your loan specialist, lender, or consult the SBA website for details on your application. However, you can almost guarantee that the following 21 SBA forms will make an appearance on your application. Use this list as your jumping-off point, and start getting these forms in order now.
Ready to Apply? Prepare Your Most Essential SBA Forms
You’ve discovered that you’re eligible for SBA financing, and an SBA 7(a) loan in particular. Great! That’s one hurdle, jumped. Now you can prepare to overcome your next hurdle: The application process itself.
As you know, though, even within the SBA 7(a) loan program, several programs and use cases exist. Depending on your circumstances, you might need to provide some documentation that’s not included on this list.
For example, business owners applying for a 7(a) loan for the purpose of refinancing existing debt will need to provide evidence of that debt, like an original, signed promissory note and a payoff statement. And if you’re intending to use your 7(a) loan to purchase an existing business, you’ll need to submit the seller’s business financial statements as well as your own.
So, always check with your intermediary lender to make sure you’re providing no less (and no more) than the essential documents you need to appropriately apply for your loan.
Business Information
The following documents help your lender and the SBA understand your business, why you need funding, and how you’ll use your funds. But what’s perhaps most important to the lender and the SBA—and the main purpose for all these documents, both financial and otherwise—is proof that you can be trusted with their funds.
Note that the SBA requires that all guarantors, including owners of 20% or more of the business, provide the following information.
1. Statement of Purpose
Every document in your SBA loan package is important, of course, but your statement of purpose is the pièce de résistance of your application’s business information section. Your statement of purpose gives you the opportunity to tell the SBA, in your own words, about what makes your business special, your management team’s expertise, how additional financing will help you grow, and why you can be trusted with your loan. Use this opportunity to break free of the SBA’s regimented application documents, and put a human face on your venture.
Don’t go too wild on this open-ended portion of your application, though—the SBA wants a few paragraphs, not a memoir. Ensure that your Statement of Purpose is succinct, well-edited, on-topic, and be sure that it includes the following information:
- Business overview and history
- A comprehensive business plan
- Company management resumes
- Information about your loan request, and how you intend to use the funds
- A description of how your SBA loan will positively affect your business
2. SBA Form 413: Personal Financial Statement
SBA Form 413, the Personal Financial Statement document, provides a comprehensive financial snapshot of every individual business owner. Here, you’ll provide information on all your sources of income, assets, liabilities, owned real estate, stocks and bonds, notes payable, and other indicators of your net worth.
The SBA requires that all owners of 20% or more of the business, spouses, and proposed guarantors need to fill out their own personal financial statements. Spouses need to sign even if they’re not guarantors.
3. SBA Form 1919: Borrower Information Form
SBA Form 1919 is used to collect basic information about the borrower and the business. Expect to answer questions concerning your history with bankruptcy, legal action, government financing, criminal activity, and more. In addition to providing this fundamental information, SBA Form 1919 facilitates the agency to complete background checks.
The SBA requires every “proprietor, general partner, officer, director, managing member of an LLC, owner of 20% or more of the equity of the Applicant, Trustor (if the Small Business Applicant is owned by a trust), and any person hired by the Applicant to manage day-to-day operations” to fill out SBA Form 1919.
4. SBA Form 912: Statement of Personal History
SBA Form 912 digs deeper into all applicants’ criminal history, or lack thereof—it’s how the SBA determines whether or not an applicant passes the agency’s “good character” standards. Unfortunately, the SBA can’t guarantee loans for businesses “with Associates who are incarcerated, on probation, on parole, or have been indicted for a felony or a crime of moral turpitude,” or to individuals with a deferred prosecution.
5. Residential Mortgage or Lease agreement, or Residential Proof of Ownership
These documents are needed to verify your address, and how much your monthly rent or mortgage payments are; or to verify that you’re not paying rent or mortgage. These docs also aid in determining your global cash flow.
6. Voided Business Check
So the bank can verify your identity and your business bank account.
7. Government-Issued ID
To make sure you are who you say you are.
Financial Documents
Your business’s financial documents are obviously crucial for your SBA application—while every financial document you provide serves an individual purpose, together they help your lender and the SBA determine your business’s value and cash flow.
Ultimately, these documents provide solid evidence that your business is eligible for an SBA loan, and the numbers to prove that your business is (or will be) able to repay your loan.
8. Form 4506-T
Fill this out to request three years’ worth of both your personal and business tax returns.
9. Cash Flow Statements
Cash flow statements—aka, how much cash is coming into your business, and how much is flowing out—are obviously necessary for calculating your business’s overall cash flow. Also, certain new businesses will need to provide a years’ worth of month-by-month cash flow projections.
10. Profit & Loss Statements
You’ll need to provide both current income statements and income statements for the past three years.
11. Business Debt Schedule
Show your lender and the SBA all long-term debts you have on your books.
12. Business Bank Statements
Lenders need a few months’ worth of your business’s bank statements to check out your business’s overall financial health—including indicators like your average daily balance, number of monthly deposits, any non-sufficient funds, and recurring payments—as well as to verify your business’s identity.
13. Balance Sheets
The SBA will want to see three years’ worth of balance sheets to determine your business’s net worth.
Collateral Documentation
Collateral provides the lender even more assurance that, one way or another, they’ll receive the amount they’re due, even if the borrower proves unable to meet the terms of their loan.
In your SBA loan application, you’ll not only need to provide evidence of collateral, but you’ll also need to prove that the value of your collateralized assets—whether those assets are held by you, your business, or a combination—are worth a large percentage of your requested loan amount.
Collateral isn’t a make-or-break aspect of your SBA loan eligibility, and some loans (like those under $25,000) don’t require the lender to take collateral at all. That said, having sufficient, valuable collateral can seriously help your approval odds.
14. Full Equipment List
The lender will take a blanket lien on all your business’s equipment, so they need to determine how much that equipment is worth.
15. Other Documents
Depending on your circumstances, you might also need to provide an appraisal of your assets, a real estate appraisal, and/or a business valuation.
16. Landlord Subordination Form
When your landlord signs this document, they’re agreeing to give the lender first dibs on your collateral if you default.
Legal Documents
The following documents prove to your lender and the SBA that your business’s legal registration and operations are sound. You’ll also need to provide documentation of any lawsuits, judgments, bankruptcies, or any other legal dealings your lender needs to be aware of.
17. Entity Documents
Different legal entities need to provide different documents, but all will need to provide business licenses and registrations.
Sole Proprietorship:
- Business license
LLC:
- Certificate of LLC members
- Member resolution, which authorizes a partner to apply for the SBA loan on behalf of the business
- Signed operating agreement
- Articles of Organization
Corporation:
- Certificate of Corporate Secretary
- Board Resolution
- Articles of Incorporation
- Bylaws
Partnership:
- Certificate of partners
- Partner resolution
- Partnership agreement
18. Executed Lease Agreement with Options to Renew
This document verifies that you have a business location, and that when your lease ends your landlord will agree to negotiate a renewal. Basically, the SBA needs to know that your business will be settled in a final location over the life of your loan.
Insurance Information
The SBA requires certain types of insurance to make sure that both your business and your collateral are protected against disasters over the course of your loan, whether those disasters are of the natural, man-made, or legal ilk.
As you might expect, insurance requirements vary depending on the nature of your business, your industry, your assets, and your loan. But lenders commonly require the following types of insurance:
19. Business Property Insurance
Protects your commercial property and its contents from natural disasters, thefts, accidents, and more. (Important: Remember to designate your insurance as lender’s loss payable.)
20. General Liability Policy
Protects you from legal claims that arise during business operations, like bodily injury and property damage.
21. Worker’s Compensation Policy
Covers the costs of medical bills, recovery, and missed wages if an employee is injured at work, or falls ill due to work-related exposures.
Some other types of insurance that your lender requires might include:
- Flood Insurance
- Life Insurance
- Liability Insurance
- Product Liability Insurance
- Dram Shop/Host Liquor Insurance
- Malpractice Insurance
- Disability Insurance
- Any state-specific insurance requirements
Next Steps in Your SBA Loan Application
As we’ve mentioned, this list of 21 essential SBA forms isn’t an exhaustive list of the documents you’ll need to gather and complete. But these are, as we say, essential forms to your SBA loan application. All together, these documents make a case to the SBA and your intermediary lender about why your business is deserving of financial assistance, and that you’re responsible and financially stable enough to repay your loan in full.
So, what happens after you’ve packaged your SBA loan? You’ll definitely want to consult the SBA loan submission checklist to make sure you’ve covered all your bases. Accidentally omitting a document won’t automatically disqualify your SBA loan application, because your lender will get back to you with a request for the missing form. But that will slow down the process underwriting process. You’ve made it this far, so don’t let an oversight keep you from the funding you need!
It’s also a good idea to draft a trusted friend, colleague, or mentor to look over your application, but especially to read over your Statement of Purpose—a fresh pair of eyes might pick up errors or omissions you’ve glossed over, or they might simply have some constructive feedback. Better yet, work with a loan specialist who can navigate every step of the SBA loan application process with you.
Yes, the SBA loan application process is long and involved. But if you’re approved for an SBA loan, all that sweat equity will more than pay for itself.
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from Fundera Ledger https://www.fundera.com/blog/essential-sba-forms
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