SBA Loan Pre-Qualification

Getting the SBA's early stamp of approval can speed your loan process
By Irwin Speizer, Freelance Writer Shopping for a small business loan can be tedious and time-consuming, and one of the worst parts is the initial wait to find out if a lender even thinks you qualify for consideration. Take heart, the U.S. Small Business Administration’s prequalification program can help. Although the SBA guarantees loans for small businesses that might not otherwise be able to get financing, you still need to get a bank or other financial institution to actually make the loan. With the SBA prequalification program, you can get certified in advance by meeting certain requirements, then shop banks with your SBA prequalification in hand. An SBA loan prequalification can:

1. Make the bank loan process go faster
2. Let lenders know that you've already proven your creditworthiness to the SBA
3. Show you any shortcomings in your finances or management
4. Give you time to shore up potential snags before you apply for a loan
5. Help avert immediate loan rejections.

Find out if the program is offered in your area

SBA prequalification is handled through local and regional SBA offices. Contact the nearest office when you're ready to get started.
Try:  The SBA offers an interactive national map that you can click through to find office locations nationwide.

Make sure you're eligible to participate

The SBA prequalification system operates as part of the agency's basic 7(a) loan program, which provides loans of up to $250,000. Although a wide variety of small businesses are eligible for 7(a) loans, the prequalification program is targeted to low-income borrowers, disabled business owners, new and emerging businesses, veterans, exporters and those in rural and specialized industries.
Try:  Review the basics of the prequalification program and the 7(a) loan program on the SBA site. To make sure your business can participate in the program, see this list of eligible and ineligible businesses.

Understand what you need to pass the SBA test

Prequalifying for an SBA loan is a lot like qualifying for the loan itself. You need to demonstrate sound financial principles and show how your business will succeed and be able to repay a loan. You need a solid business plan, detailed financial statements and evidence of a qualified management team.
Try:  The SBA's Basics for Loan Applications will help you discover if any areas of your prequalification proposal need work. Get help creating a top-notch business plan with Business Plan Pro and find hundreds of real business plans to use as examples at Business Plan Archive. For help with financial statements, visit Baruch College's Guide to Financial Statements tutorial.

Be prepared to work with an intermediary

The SBA works through intermediaries to carry out the loan prequalification program. Two of the most active are the Small Business Development Centers and Women's Business Centers. Representatives of these organizations can help you prepare your loan application to improve your chances of obtaining SBA prequalification.
Try:  Two places to look for local intermediaries are the Women's Business Centers listings and the Small Business Development Centers listings.

• If you've taken out business loans in the past and already have a banker, you probably don't need this program
• The loan prequalification program favors certain groups. If you're in one of those groups (women, veterans, low-income, etc.), you have a good chance of getting help.
• Some intermediaries that assist with SBA prequalification are for-profits that charge a fee. Nonprofits like Small Business Centers don't.