If you are a new entrepreneur and looking for capital, one of your first options for a loan will be the SBA, or to be much clear, asking for a SBA-backed loan. It is worth mentioning in this regard that SBA loan applications are made through a bank. As a matter of fact the SBA guarantees a loan to the bank, so in case the borrower defaults; the bank is guaranteed a portion of the loan by the SBA. But the fact remains that you are still liable for the loan, so your obligation does not go away. All this mechanism makes it easier for banks to lend to budding entrepreneurs, but it does not mean that the bank can lend indiscriminately. Theoretically speaking, the bank will analyze the application to protect its interest as well as the SBAs.

Always remember the fact that the SBA does not lend directly to the business owner. It is important that the bank you are working with is knowledgeable about SBA loans, as it will initially process your application, not the SBA.Once the bank approves the application then the SBA will review it.

What will the bank look for in your application

Good Credit Score. This is a very important factor in the consideration for a loan, but not the only one. If your score is not good enough, work on improving it. Although there is no denying the fact that good credit is a key factor for getting a loan, is not the only factor. As a matter of fact, if you dont have perfect credit, you can moderate it by providing a thorough business plan, collateral, a higher co-investment in the project, a cosigner, etc. In theory, you will have to explain any outstanding issues with your credit. Furthermore, lenders have different appetite for risk (large commercial banks are usually more conservative), so you may be able to find a lender that will work with you.

Collateral (security for loan). It is worth pointing that in some cases a good credit score and down payment are enough to secure a loan. But depending on the amount of the loan, you may also have to offer collateral. Theoretically speaking, you can use your house, stocks, or any other major possession as collateral if the bank requires security in the event you cannot pay back the loan.

Experience. According to experts, the relevant experience of the business owner is an important factor for the loan package. It is worth mentioning in this regard that banks feel more confident in giving out a loan to business owners who have relevant experience in the business that they are starting, such as a dentist opening a private practice.

Owners Investment. If you are willing to start a new business, be prepared to invest a certain portion of the start-up costs personally. It is worth noting that lenders rarely finance 100% of the business. As a matter of fact, they will expect you to raise 20 to 40% of the investment yourself. Thats why, the higher your personal investment in the business, the better the loan application looks to the lender.

Good Business Concept or Plan. Always remember the proper definition of a good business concept. A good business concept or plan is one that is believable and relatively conservative. It is worth mentioning in this regard that lenders are conservative organizations that do not like to take large risks.

Capacity to Manage and Pay. Its your responsibility to make sure that the business should be able to generate enough cash to pay back the loan installments.

Guarantees. After going through all these process, the lender will look at how the loan can be secured. If experts are to be believed, he or she will give importance to the individuals personal financial statement and see if the loan can be secured against personal or business assets.

Furthermore, when applying for a loan and writing a business plan, make sure your financial projections are correct. It is important that you do your research properly and are completely aware of your business. In theory, it is surprising to see the number of entrepreneurs who do not pay enough attention to the financial aspect of the business. Fact remains that paying close attention to the financial details will determine whether your business will survive.

Although there are lots of banks willing to help entrepreneurs fund and expand their businesses, their primary responsibility is to make money from the loans and minimize their risk. It is worth pointing in this regard that just because you have a great idea and are motivated to see it through, you may not get a loan. As a matter of fact, banks are very careful with innovation; they are conservative institutions that tend to lend to tried-and-true businesses. This is the reason; whenever you submit your business proposal, always ask yourself, What would make this a good deal for the bank What assurances and promises (apart from your good credit and great idea) can you give to the bank so it will get its money back plus interest

Its your responsibility to prepare the loan application package. Theoretically speaking, a Loan Package is the paperwork you submit to the bank in order to apply for a loan. The Loan Package includes the following:

• Business Plan

• Business Financial Projections

• Personal Financial Information

• Personal Tax Statements

• Information about business, location, sales contracts, etc.

• Business Owners Resumes

It is worth mentioning in this regard that loan applications are approved or declined much quicker than people think. As a matter of fact a lender can approve an SBA express loan within 36 hours. On the other hand, regular commercial loans have similar processing times. If experts are to be believed, you should expect to get an answer within 2 weeks, and hopefully close the loan (get access to the money) within another 2 weeks. Though, if the institution is in need of more documentation, or if the loan is for a larger amount, then it might take longer to process the loan, especially SBA loans.