Government small business loans are usually long-term and low-interest that can be borrowed for different purposes like expanding the business, buying new equipment, and so on.
Although the interest rates of most government lenders are affordable, they don’t prefer lending to small businesses as they consider it a risky investment. You will need to meet the following requirements to qualify for a government business loan.
- A good personal credit score that is above 680.
- You must have a two-year-old profitable business.
- You must have invested your personal time & money in the business.
How to Prepare Your Government Business Loan Application
Government lenders are infamous for needing a lot of paperwork. You can expect to spend a good amount of time gathering documents for a loan application. Moreover, processing time may also take somewhere between 4 to 12 weeks. Therefore, it is important you better prepare for it.
Below is the checklist for a small business loan from the government.
You will be asked to provide your education background, personal financials, previous addresses, and criminal records (if any). Certain crimes may disqualify you.
You must have a strong business plan giving at least 3 to 5 years of financial projections that include future sales, profit and loss, cash flows, etc.
Personal & Business Tax Returns
Most small business government loans will require you to submit your business and personal tax return for the past 3 years. Your personal tax returns play a huge role in whether or not you will get a loan.
Though government loans, especially that are backed by SBA (Small Business Administration) don’t need collateral, your claimant will be stronger if you provide your valuable business assets such as real estate, inventory, and equipment as collateral.
Lenders may request you to produce certain legal documents such as articles of incorporation, certification of business, copies of your business license or contracts with 3rd parties (if any).
So, get ready with these necessary requirements before applying for a small business loan from the government.