SBA 504 Loan Application Checklist

Navigating the SBA 504 Loan application process can be a daunting task, especially for small business owners who are looking to secure long-term, fixed-rate financing for major assets. This checklist provides a comprehensive guide to ensure you have all necessary documents and information before starting your application. The SBA 504 Loan program is designed to help small businesses purchase real estate or equipment, and understanding each step can streamline the process and increase your chances of approval.

1. Eligibility Requirements Before diving into the application, verify that your business meets the SBA 504 Loan eligibility requirements:

• Business Size: Your business must be a for-profit enterprise and meet the SBA size standards.
• Location: Your business must operate in the United States or its territories.
• Creditworthiness: Demonstrate a good credit history and the ability to repay the loan.
• Use of Funds: Funds must be used for purchasing or improving fixed assets, such as real estate or equipment.

2. Prepare Your Business Plan A solid business plan is crucial for the SBA 504 Loan application. It should include:

• Executive Summary: Outline your business goals, strategies, and financial projections.
• Business Description: Detail the nature of your business, products, and services.
• Market Analysis: Provide an analysis of your market, competition, and target audience.
• Financial Statements: Include profit and loss statements, balance sheets, and cash flow statements.

3. Gather Required Documentation Ensure you have all required documents ready:

• Personal and Business Tax Returns: Typically, the last three years.
• Personal Financial Statement: A comprehensive summary of your personal financial situation.
• Business Financial Statements: Profit and loss statements and balance sheets for the past three years.
• Loan Application Form: Complete the SBA Form 1244, which includes information about the loan request.

4. Assemble Your Business Financial Information Your lender will require detailed financial information:

• Balance Sheets: Detailed for the past three years, including current assets and liabilities.
• Profit and Loss Statements: For the past three years, showing revenue, expenses, and net income.
• Cash Flow Projections: Forecast for at least one year, showing expected cash inflows and outflows.

5. Prepare Project and Use of Funds Documentation Provide a detailed description of the project and how the funds will be used:

• Project Plan: A clear plan for the acquisition or improvement of assets.
• Cost Estimates: Detailed estimates or invoices for the costs associated with the project.
• Appraisal Reports: If applicable, provide property appraisal reports to support the loan amount requested.

6. Work with a Certified Development Company (CDC) A CDC is an SBA-approved organization that helps facilitate the SBA 504 Loan process:

• Find a CDC: Locate a CDC in your area that will assist with the application.
• CDC Requirements: Be aware of any specific requirements or documentation the CDC may need.

7. Review and Submit Your Application Before submitting your application:

• Double-Check Documentation: Ensure all forms are completed accurately and all required documents are included.
• Review Requirements: Verify that you meet all SBA and lender requirements.
• Submit Application: Follow the CDC's submission process, which may involve both electronic and physical submissions.

8. Follow Up and Communicate After submission, maintain communication with your CDC and lender:

• Status Updates: Request updates on the status of your application.
• Additional Information: Be prepared to provide any additional information or documentation if requested.

9. Loan Approval and Closing Once approved, you’ll need to complete the final steps:

• Loan Closing: Review and sign the loan agreement and related documents.
• Disbursement of Funds: Funds will be disbursed according to the terms of the loan agreement.

10. Post-Loan Responsibilities After securing the loan, adhere to the following:

• Repayment: Make timely payments according to the loan schedule.
• Record Keeping: Maintain accurate records of how loan funds are used.
• Compliance: Ensure compliance with all SBA regulations and reporting requirements.

Additional Tips

• Consult a Financial Advisor: Consider working with a financial advisor to ensure your application is robust and comprehensive.
• Understand Terms: Be clear on loan terms and conditions, including interest rates and repayment schedules.

Conclusion Securing an SBA 504 Loan involves meticulous preparation and understanding of the process. By following this checklist, you can streamline your application and increase your chances of obtaining the necessary financing to support and grow your business.