What do you need to apply for an SBA 504 Loan?
SBA (Small Business Administration) Loans are wonderful for small businesses looking to expand. The loans feature favorable terms, such as a 10% down payment and a below market fixed interest rate, and they are an accessible means of financing for small business owners. Since it’s inception, SBA loan programs have helped countless small businesses expand their operations. Throughout the last 60 years however, there’s been a lot of chatter about the programs. Some good, some bad, and lots of misconceptions. One of the misconceptions is regarding documents needed for an SBA Loan.
This article focuses on the SBA 504 Loan and will clear up myths regarding the documents and paperwork required. The SBA 504 Program is a loan program created to make real estate and equipment purchases affordable to small business owners. The 504 Loan can also be used for construction projects and refinancing commercial real estate debt.
When paperwork is mentioned regarding an SBA Loan, there is typically an eye roll or even a grimace. Truth of the matter is, the paperwork required is almost the same that is required by a conventional bank. Regardless of how an individual is getting a loan, be it through their own bank, a credit union, or the SBA, lenders will need thorough information about the borrower and the borrower’s financial history, an understandable request considering how much capital is on the line.
Documents Needed for SBA Loan: Getting Started with a Prequalification
To get the ball rolling with an SBA 504 Loan, the best way to start is to get prequalified, regardless of where you are in the buying process. Prequalifcations are done by Certified Development Companies (CDCs) who administer loans on behalf of the SBA. The three items needed for prequalifcation are:
- Three years of personal and business tax returns
- A personal financial statement
- Interim financials (Company Balance Sheet and Income Statement)
TMC Financing, a Certified Development Company that administers 504 Loans in California and Nevada, can prequalify a business owner for free and within 48 hours. With only the items above, TMC (or if located outside of California or Nevada, another CDC) can confirm eligibility and estimate the size of loan the business owner qualifies for. This can be very beneficial to help determine purchasing power AND give a buyer a leg up on other offers. Sellers love qualified buyers.
Documents Needed for SBA Loan: Application
Once a small business owner is prequalified and has identified a property to purchase, TMC Financing (or other designated CDC) walks the owner/borrower through the loan application. One of the best parts of the SBA 504 Loan is that the small business owner is supported throughout the entire loan process. TMC Financing acts as the borrower’s advocate and guides them through the entire application AND loan process. From application until the loan is paid off, TMC Financing is the borrower’s partner and advocate. Borrowers are never left with paperwork or applications to be done on their own.
Along with the application, the SBA and the conventional lender will require an appraisal of the property and an environmental review. These are reports both handled by the third party and can be ordered on the borrower’s behalf.
Paperwork FAQ: Do I need a business plan?
A business plan is extremely useful when growing your business and it is a great opportunity to show a potential lender you’re worth the investment. However, it is not a requirement when applying for an SBA 504 Loan, unless your business is a startup. Business plans are only required when businesses are less than two years old.
Do you qualify?
If you have other questions about obtaining a 504 loan, one of TMC Financing’s 504 loan experts would be happy to speak with you. TMC is an SBA Premier Certified Lender and a high-volume loan provider. With nearly 40 years of experience, TMC can help you find the financing that is best for you and guide you through the 504 loan process. Contact TMC Financing today.