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Effective August 1, 2008, the SBA has instituted a new policy for its7a loans, which requires life insurance policies in the full amount ofthe loan on any and all owners in cases where the ongoing viability ofthe business depends on the survival of the owners.Effective August 1, 2008, the SBA has instituted a new policy for its 7a loans, which requires life insurance policies in thefull amount of the loan on any and all owners in cases where the ongoing viability of the business depends on thesurvival of the owners.If there is more than one business owner, each owner must have a life insurance policy to cover the entire amount of theloan.Also, the life insurance policy must be assigned to the lender for the life of the loan. The policy holder can still namebeneficiaries, but they will only be paid after the loan amount has been covered.This policy is a hardship for some small business owners, for example if one of the parties has a health condition thatmakes him or her uninsurable. The SBA will consider waiving this requirement if a key owner is not insurable undercertain circumstances.Note: The amount of life insurance required can be reduced if there is solid collateral that could be easily liquidated and,on a liquidation basis, could pay down the loan balance. In that case, the SBA might consider lowering the life insuranceamount by the amount of that collateral, but the collateral must be real and tangible assets such as real estate orequipment as the SBA doesn’t consider receivables or inventory as collateral of value.

SBA Loan Application Checklist

Once you have decided to apply for a loan guaranteed by the SBA, you will need to collect the appropriate documents for your application. The SBA does not provide direct loans. The process starts with your local lender, working within SBA guidelines.

Use this checklist to ensure you have everything the lender will ask for in order to complete your application. Once your loan package is complete, your lender will submit it to the SBA. The ones that want a loan can consider Empower Federal Credit Union to get the right financial guidance.

1. SBA Loan Application

This form should be completed by you, the business owner.

Application for Business Loan – SBA Form 4

This form should be completed by your lending institution.

Lenders Application for Guaranty or Participation – SBA Form 4i

2. Personal Background

A personal background statement should be completed.

Statement of Personal History – SBA Form 912

3. Personal Financial Statement

A personal financial statement should be completed.

Personal Financial Statement – SBA Form 413

4. Business Financial Statements

A detailed, signed balance sheet and Profit and Loss (P&L) statement. Statements (current within 90 days of application) and the last three (3) fiscal years Supplementary Schedules are required on Current Financial Statements.

5. Projected Financial Statements

Detailed one (1) year projection of income and finances (attach a written explanation as to how you expect to achieve this projection).

6. Ownership and Affiliations

A list of names and addresses of any subsidiaries and affiliates, including concerns in which the applicant holds a controlling (but not necessarily a majority) interest and other concerns that may be affiliated by stock ownership, franchise, proposed merger or otherwise with the applicant.

7. Business Certificate/License

A Certificate of Doing Business (If a corporation, stamp corporate seal on SBA Form 4 section 12).

8. Loan Application History

By law, the SBA may not guarantee certain types of loans if your business can obtain funds on reasonable terms from a bank or other private source. This means you must first seek private financing.

Your company must be independently owned and operated, not dominant in its field, and must meet certain standards of size in terms of employees or annual receipts. SBA loans cannot be made to speculative businesses, newspapers, or businesses engaged in gambling.

Applicants for loans must also agree to comply with the SBA regulation that there will be no discrimination in employment or services to the public based on race, color, religion, national origin, sex or marital status.

9. Business Income Tax Returns

Signed business federal income tax returns for previous three (3) years.

10. Personal Tax Returns

Signed personal federal income tax returns of principals for previous three (3) years.

11. Résumés

Personal résumés including the business experience of each principal.

12. Business Overview and History

Brief history of the business and its problems. Include an explanation of why the SBA loan is needed and how it will help the business.

13. Business Lease

Copy of business lease (or note from landlord) giving terms of proposed lease.

14. For purchasing an existing business:

The following information is needed for purchasing an existing business:

a. Current balance sheet and P&L statement of business to be purchased.

b. Previous two (2) years federal income tax returns of the business.

c. Proposed Bill of Sale including Terms of Sale.

d. Asking price with schedule of:

  1. Inventory
  2. Machinery and equipment
  3. Furniture and fixtures

SBA Loans

If you’re planning to start a business or expand an existing business, you might need financing help. SBA participates in a number of loan programs designed for business owners who may have trouble qualifying for a traditional bank loan.

To start the process, you should visit a local bank or lending institution that participates in SBA programs. SBA loan applications are structured to meet SBA requirements, so that the loan is eligible for an SBA guarantee. This guarantee represents the portion of the loan that SBA will repay to the lender if you default on your loan payments.

The SBA Loan Application Checklist provides a listing of forms and documents you and your lender will need to create a loan package to submit to SBA.

The following are direct links to information about commonly requested SBA programs:

Starting and Expanding Businesses

Gives 7(a) loans to eligible borrowers for starting, acquiring and expanding a small business. This type of loan is the most basic and the most used within SBA’s business loan programs. Borrowers must apply through a participating lender institution.

  • Basic 7(a) Loan Program

Provides growing businesses with long-term, fixed-rate financing for major fixed assets, such as land and buildings.

  • Certified Development Company (CDC) 504 Loan Program

Offers very small loans to start-up, newly established or growing small business concerns. SBA makes funds available to nonprofit community based lenders which, in turn, make loans to eligible borrowers in amounts up to a maximum of $35,000. Applications are submitted to the local intermediary and all credit decisions are made on the local level.

  • Microloan Program

Disaster Loans

Provide financial assistance to victims of disasters or to individuals in a declared disaster area. You may be eligible for this type of loan even if you don’t own a business.

  • Disaster Assistance Loans

Assist small businesses, small agricultural cooperatives and nonprofit organizations as they recover from economic losses resulting from physical disaster or an agricultural production disaster.

  • Economic Injury Loans

Export Assistance Loans

Provide exporters and lenders with a streamlined method of obtaining financing for loans and lines of credit up to $250,000. Lenders use their own credit decision process and loan documentation; exporters get access to their funds faster. SBA provides an expedited eligibility review with a response in less than 24 hours.

  • Export Express

Offers loans targeted at businesses that are able to generate export sales but need additional working capital to support these opportunities.

  • Export Working Capital

Gives term loans that are designed for businesses that plan to start/continue exporting or those that that have been adversely affected by competition from imports. The proceeds of the loan must enable the borrower to be in a better position to compete.

  • International Trade Loans

Veteran and Military Community Loans

Provides financial assistance for veterans and members of the military community who want to establish or expand small businesses.

  • Patriot Express Pilot Loan Initiative

Offers funds to eligible small businesses to meet ordinary and necessary operating expenses that could have been met, but are unable to meet, because an essential employee was “called-up” to active duty in their role as a military reservist.

  • Military Reservist Economic Injury Disaster Loan

Special Purpose Loans

Help small businesses meet their short-term and cyclical working-capital needs through the SBA umbrella program called CAPLines.

  • CAPLines

Provides financing to eligible small businesses for the planning, design or installation of a pollution control facility.

  • Pollution Control Loans

CAIP is a program established to assist U.S. companies that are doing business in areas of the country that have been negatively affected by the North American Free Trade Agreement (NAFTA). To be eligible, a business must reside in a county noted as being negatively affected by NAFTA, based on job losses and the unemployment rate of the county.

Business Loan Application Checklist

SBA is not the only source for small-business loans. State and local economic-development agencies – and numerous nonprofit organizations – provide low-interest loans to small business owners who may not qualify for traditional commercial loans.

When it comes to applying for these loans, the good news is that most of these other lenders require the same kinds of information. Of course, each loan program has specific forms you need to fill out. But for the most part, you’ll need to submit the same types of documentation. So it’s a good idea to gather what you’ll need before you even start the application process.

Here are the typical items required for any small business loan application:

Loan Application Form

Forms vary by program and lending institution, but they all ask for the same information. You should be prepared to answer the following questions. It’s a good idea to have this information prepared before you fill out the application:

  • Why are you applying for this loan?
  • How will the loan proceeds be used?
  • What assets need to be purchased, and who are your suppliers?
  • What other business debt do you have, and who are your creditors?
  • Who are the members of your management team?
  • Personal Background

Either as part of the loan application or as a separate document, you will likely need to provide some personal background information, including previous addresses, names used, criminal record, educational background, etc.


Some lenders require evidence of management or business experience, particularly for loans that can be used to start a new business.

Business Plan

All loan programs require a sound business plan to be submitted with the loan application. The business plan should include a complete set of projected financial statements, including profit and loss, cash flow and balance sheet.

Here are some resources for preparing your business plan:

  • Essential Elements of Writing a Good Business Plan
  • Templates for Writing a Business Plan
  • Personal Credit Report

Your lender will obtain your personal credit report as part of the application process. However, you should obtain a credit report from all three major consumer credit rating agencies before submitting a loan application to the lender. Inaccuracies and blemishes on your credit report can hurt your chances of getting a loan approved. It’s critical you try to clear these up before beginning the application process.

Business Credit Report

If you are already in business, you should be prepared to submit a credit report for your business. As with the personal credit report, it is important to review your business’ credit report before beginning the application process.

Income Tax Returns

Most loan programs require applicants to submit personal and business income tax returns for the previous three years.

Financial Statements

Many loan programs require owners with more than a 20 percent stake in your business to submit signed personal financial statements.

You may also be required to provide projected financial statements either as part of, or separate from your business plan. It is a good idea to have these prepared and ready in case a program for which you are applying requires these documents to be submitted individuall.

The following forms may be used to prepare your projected financial statements:

  • Balance Sheet
  • Income Statement
  • Cash Flow
  • Bank Statements

Many loan programs require one year of personal and business bank statements to be submitted as part of a loan package.

Accounts Receivable and Accounts Payable

Most loan programs require details of a business’s most current financial position. Before you begin the loan application process, make sure you have accounts receivable and accounts payable.


Collateral requirements vary greatly. Some loan programs do not require collateral. Loans involving higher risk factors for default require substantial collateral. Strong business plans and financial statements can help you avoid putting up collateral. In any case, it is a good idea to prepare a collateral document that describes cost/value of personal or business property that will be used to secure a loan.

Legal Documents

Depending on a loan’s specific requirements, your lender may require you to submit one or more legal documents. Make sure you have the following items in order, if applicable:

  • Business licenses and registrations required for you to conduct business
  • Articles of Incorporation
  • Copies of contracts you have with any third parties
  • Franchise agreements
  • Commercial leases
  • Organizing your documents

Keeping good records is essential for running a successful business, but even more critical when applying for a loan. Make sure required documents are orderly and accurate. All information you provide will be verified by your lender and the organization guaranteeing the loan. False or misleading information will result in your loan being denied. Finally, make sure you keep personal copies of all loan packages.

Credit Scores and Factors for Acquiring Financing

If you’ve ever applied for a charge account, a personal loan, insurance, or a job, there’s a file about you. This file contains information on where you work and live, how you pay your bills, and whether you’ve been sued, arrested or filed for bankruptcy.

Companies that gather and sell this information are called Consumer Reporting Agencies (CRAs). The most common type of CRA is the credit bureau. The information CRAs sell about you to creditors, employers, insurers and other businesses is called a consumer report.

The Fair Credit Reporting Act regulates the collection, dissemination and use of consumer credit information. If your business uses credit reports for the following reasons, there are rules and regulations you must follow to ensure privacy of credit information:

  • To extend credit to your customers
  • As a pre-employment check for potential employers
  • Or furnish customer information to credit reporting agencies

The resources below can provide more information on these requirements and how to comply.

  • Using Consumer Credit Reports: What Employers Need to Know

Explains how you, as an employer, can use consumer reports when you hire new employees and when you evaluate employees for promotion, reassignment, and retention as long as you comply with the Fair Credit Reporting Act.

  • Credit Reports: What Information Providers Need to Know

Provides guidance for businesses that are reporting consumer credit information to credit reporting agencies, including rules that must be followed under the Fair Credit Reporting Act.

  • Using Consumer Credit Reports : What Insurers Need to Know

Details how insurance providers using consumer credit reports to underwrite insurance policies and to screen high-risk applicants must comply with privacy regulations under the Fair Credit Reporting Act.

  • Using Consumer Credit Reports : What Landlords Need to Know

Offers a fact sheet for landlords using consumer and credit reports to evaluate rental applications.

  • Disposing of Consumer Report Information? New Rule Tells How

Covers how businesses should take appropriate measures to dispose of sensitive information derived from consumer reports. This new federal rule was established to help protect the privacy of consumer information and reduce the risk of fraud and identity theft.

More Information

  • Pre-Employment Checks

Explains the use of personal information, such as credit reports, used in background screening.

  • Protecting Financial Information

Provides education and guidance to help financial companies comply with the Safeguard Rule.

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