FINANCING OPTIONS: Application Procedures

                        APPLICATION PROCEDURES

SBA loans are guaranteed loans.  The actual funds come from SBA
participants (lenders).  They make the decisions on whether to 
apply to SBA for a guaranty on their loan. Therefore, the keys to
successfully achieve a business loan is to be adequately prepared
before applying and to work with the lender during their 
processing. 

The basic loan application includes a written statement 
describing the business -- including the process by which it 
generates income, a brief history on how it started and got to 
the point where it now seeks the financing, the purpose of the
requested loan proceeds, and an explanation of how the loan will 
be repaid.  This latter portion generally requires the most 
thought and time as it involves preparing and justifying 
assumptions about the income and expenses of the business as if 
the loan funds have been received.

Applications also include historical and current financial 
statements.  If the loan request is to be considered by SBA, 
these statements must be current, that is, within 90 days of
application.  Since most business loan applications are not 
requested right after the close of a businesses fiscal year, 
there is a need for updating a balance sheet, profit and  loss or
income statement, and a reconciliation of the net worth. This 
usually necessitates the generation of an additional set of 
financial statements.    

SBA recognizes that the loan application process can appear 
involved and even complicated to persons unfamiliar with the 
process. This does not mean that applicants need to hire outside
agents to obtain a loan.  However, the services of an accountant 
will most likely be required for applicants not familiar with the
requirements of tax authorities and general accounting.  The 
process can and has been taken on by most business owners.  
Remember, the understanding of finance and financing is one of 
the owner's principal duties.  

To assist persons in preparing their application, the SBA offers 
a variety of management assistance services such as the Small 
Business Development Centers (SBDC) network and the Service Corp 
of Retired Executives (SCORE).  These organization will work with
the applicant to help them become familiar with the loan 
application process, understand the importance of the business 
plan, and assist in the preparation of the application and 
supportive documents.  However, completing the actual plan and
documents is the responsibility of the applicant.  

A listing of the SCORE Chapters in your area can be found in 
http://www.sba.gov/gopher/Local-Information/Service-Corps-Of-Retired-Executives
A listing of the Small Business Development Center serving your
area can be found in 
http://www.sba.gov/gopher/Local-Information/Small-Business-Development-Centers.

Once the application is ready, the applicant should take all 
available financial and other business information to a financial
institution. The SBA recommends that you start with the bank that
has your checking account, and that you work with the individuals
at these institutions who have the experience of making loans by 
using SBA's Guaranty loan programs.

Applicants should always request that their lender make the loan
directly.  If the lender is unable or unwilling to make the loan 
by themselves, the applicant can and should request that the 
lender consider making their loan in conjunction with an SBA 
guaranty.  If the lender agrees, the applicant will then be asked
to complete a second application for forwarding to the SBA by the
lender. If the lender is not willing to participate, the 
applicant should find out why and learn what they can do to 
improve their application.  The applicant should do all they can 
while working with the lender to obtain favorable consideration.
SBA no longer has any direct loan funds, so the historical 
requirement that and applicant needs to be turned down by the 
banks before being able to apply to SBA for a direct loan is no 
longer applicable.