By Beau Eckstein

June 17, 2025

business financing, business ownership, Franchise Opportunity, Opportunity, SBA loan

Getting an SBA loan can be a crucial step for entrepreneurs looking to buy or start a business. However, understanding the intricacies of the loan approval process can be daunting. In this article, we will pull back the curtain on what lenders really want to see in your loan package and discuss the key components that can either fast-track your approval or lead to denial. Drawing from my experience as an SBA loan broker, I will guide you through the essential documents needed, the factors that instill confidence in lenders, and common pitfalls to avoid.

Key Components Lenders Look for in Your SBA Loan Package

When applying for an SBA loan, the first thing lenders will evaluate is your financial statement. If you are buying a business, they will want to see the financials and tax returns of that business. Here are the key components you need to include:

  • Financial Statements: These should reflect the business's cash flow and overall financial health.
  • Tax Returns: Provide the tax returns of the business for the last three years.
  • Personal Financial Statement (Form 413): This includes your personal financial details to assess your capability to repay the loan.
  • Resume: A well-crafted resume demonstrating your experience and qualifications related to the business you are acquiring.
  • Debt Schedule: If you own 20% or more of any other businesses, include their financial packages as well.

Financial statements and tax returns for SBA loan approval

What Makes Lenders Say Yes Faster

To push your loan application forward, lenders need to see strength in the business you want to acquire. Here are some factors that can instill confidence:

  • Strong Business Performance: If you’re buying a well-established company with a strong cash flow, that’s a huge plus. For example, a 20-year-old construction company with consistent cash flow would be seen as a stable investment.
  • Debt Service Coverage Ratio: This ratio indicates that the business can cover its debt payments comfortably, ideally two times over.
  • Transferable Experience: If you have experience in the industry, such as having previously worked in construction, that adds significant weight to your application.
  • Ability to Obtain Required Licenses: Being able to get the necessary licenses before closing can further reassure lenders.

Strong business performance for loan approval

Creating a Lender-Friendly Resume Using AI

In today’s digital age, you can leverage technology to simplify your application process. For instance, using AI tools like ChatGPT can help you create a compelling resume tailored for SBA underwriting. Here’s how:

  1. Input your details and highlight your transferable experience.
  2. Ask the AI to draft a resume that would resonate with an SBA underwriter.
  3. Review and personalize the output to ensure it reflects your unique qualifications.

This approach can save you time and help you present your qualifications in the best light possible.

Common Mistakes That Kill Deals Before Underwriting

Understanding what can derail your loan application is just as important as knowing what to include. Here are some red flags that can slow down or kill your deal before it even reaches underwriting:

  • Significant Losses on Tax Returns: If your tax returns show substantial losses with no way to add back income, that’s a major concern.
  • Lack of Outside Income: If you have no other income sources and are trying to buy a business, it raises questions about your financial stability.
  • No Reserves: Entering a deal without sufficient reserves in your bank account can be a deal-breaker.
  • Unverified Investor Partnerships: Claiming an investor partner without proof of their financial backing can lead to skepticism.

Red flags in SBA loan applications

Can Weak Buyers Still Close Deals? Yes—If Smart

Even if you face some weaknesses in your application, it’s still possible to close deals successfully. Here’s how:

  • Understanding the Nuances: If you know the intricacies of the SBA process, you can better articulate your situation.
  • Bringing in Strong Partners: If you lack certain qualifications, consider bringing in a partner who complements your strengths.
  • Realistic Expectations: Sometimes, aiming for a smaller business can be a more feasible stepping stone.

Understanding Compensating Factors

In lending, compensating factors are essential. If you have weaknesses, addressing them upfront can enhance your chances of approval:

  • Articulate Weaknesses: Be upfront about areas where you might fall short and explain how you plan to mitigate those risks.
  • Provide Supporting Documentation: Include any documents that can help substantiate your claims and bolster your application.
  • Know Your Underwriter: Remember that the person reviewing your file may know nothing about you, so clear communication is vital.

The Importance of Properly Packaging Your Loan

How you package your loan can significantly impact its approval chances. Here are some tips for effective packaging:

  • Comprehensive Documentation: Ensure all required documents are included and formatted correctly.
  • Clear Narrative: Provide a coherent story that connects your experience, the business’s financials, and your goals.
  • Professional Presentation: A polished presentation can make a positive impression on lenders.

Importance of loan packaging

The Risks of Going to the Wrong Bank

If you think approaching your local bank will guarantee success, you may be mistaken. Here’s why:

  • Limited Knowledge: Most local banks may not have the expertise needed for SBA loans.
  • Higher Denial Rates: Without the right connections, your application may be more likely to be denied.
  • Finding the Right Fit: Working with a Preferred Lender Program (PLP) can improve your chances significantly.

Risks of going to the wrong bank for SBA loans

Why Working with SBA Pros Matters

Working with an SBA loan broker can change the game for your application. Here’s how:

  • Expert Guidance: Brokers understand the lending climate and can guide you to the right lender.
  • Streamlined Process: They can help package your application effectively, saving you time and effort.
  • Increased Approval Chances: With their expertise, your chances of getting approved increase significantly.

Benefits of working with SBA pros

Conclusion

Securing an SBA loan can be a complex process, but understanding what lenders are looking for can make all the difference. By preparing a comprehensive loan package, addressing potential weaknesses, and working with experienced professionals, you can enhance your chances of approval. If you’re serious about acquiring a business or launching a startup, don’t leave your financing to chance. Leverage the insights shared in this guide to navigate the SBA loan approval process successfully.

For personalized assistance in packaging your loan and matching you with the right lender, consider reaching out to a trusted SBA loan broker. With the right support, you can turn your entrepreneurial dreams into reality.

Working with Beau Eckstein as your commercial mortgage advisor when trying to locate the best SBA financing can be beneficial because he has extensive experience and knowledge in the field. He can help navigate the complex process of obtaining SBA financing and assist in finding the best options for your specific situation.

Additionally, his established relationships with lenders can help increase the chances of getting approved for funding.

Overall, working with a knowledgeable and experienced advisor like Beau Eckstein can greatly increase the chances of successfully obtaining SBA financing.

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