Getting Started

Illustration by Alex Scholar

Determining whether your business is eligible for an SBA loan is one of the most critical steps in the lending process. Your business must be for-profit, located in the U.S., and owned by U.S. citizens or legal permanent residents. There are some types of businesses not eligible for SBA assistance, so make sure to contact your lender as early as possible in the application process to determine eligibility. 

It also is wise to thoroughly research your business idea. Determine how to make your business successful, define how much capital you will need, then confidently present the plan to your lender. You must have funds available to inject into the business. If it is a startup, at least 20 percent of the total project will be needed. You must have something at stake, as the lender will not take 100 percent of the associated risk. 

SBA loan terms usually are longer than a conventional loan, which helps spread out payments. These loans are available in terms of seven years for working capital, 15 years for equipment, and up to 25 years for real estate. The interest rates are set by the lender, but generally do not exceed the Wall Street Journal Prime, plus 2.75 percent.

Structure and Plan

Establish your business structure, and provide all appropriate documentation, such as a partnership agreement, articles of incorporation, bylaws, and licenses. Make sure to have a business banking account opened at a local institution, and have your federal/state ID numbers on hand. These numbers will be needed on several forms.

Write a business plan for all startup and expansion businesses. It doesn’t have to be complicated or long, but it should provide a plan for success. Be sure to include a management résumé that reflects your experience in the industry. If you are planning to purchase property or build on vacant land, be sure to include all pertinent exhibits and details. 

Have all of the financial exhibits ready for review, including tax returns (both personal and business) and itemized projections for at least two years. Tax and personal information will need to be submitted by all owners with 20 percent or higher stake in the company. 

SBA Success in DuPont

As one example of someone who recently has been successful with an SBA project, let me share the story of local resident and Army veteran Ted Danek, who recently shared his story of how my firm, America’s Credit Union, was able to help him.  

“(Your) ability to help me with the SBA process, compared to the banks I talked to, made this an easy choice. Applying for an SBA loan is daunting, to say the least. While it has to be, in order to protect taxpayer funds, the myriad of forms and requirements could scare away the bravest of souls. You … were a great relief and provided immeasurable help in the process…” 

Danek’s project was Ace Hardware’s newest location in DuPont, which, when open, will be equipped with an outside nursery and two electric vehicle-charging stations.