What the SBA Needs to Know About Your Personal Finances

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As anyone who has ever applied for a loan knows, applying for a loan often means filling out reams of paperwork about your personal financial situation. When applying for a business loan – including governmental loans – that circumstance absolutely still applies. As such, here’s a look at what the United States Small Business Administration needs to know about your personal finances before loaning you money.

What Is An SBA Loan?

SBA Loans are a basket of loans that are offered by the Small Business Administration. Some of these are direct loan programs, while others are loans run by private banks but guaranteed by the Small Business Administration. There are many types of loans and guarantees, including loans for business expansion and disaster recovery.

SBA Loans are often lower. As noted on their SBA loan rates on Lantern by SoFi page, these rates are highly competitive: “Often, an SBA loan is a more affordable form of financing, and can provide the working capital you need to grow your business.”

Because of lowered requirements and governmental backing, SBA loans are often easier to get than commercially available loans. However, that doesn’t mean that the application process is easier. Depending on the loan and the nature of your business, the SBA and other involved banks will still need to know quite a bit about your personal finances.

Personal Financial Statements

As part of an SBA Loan, you will have to fill out a personal financial statement. This statement must be filled out by everyone who owns the business, anyone who has more than a 20% interest in the business, every general partner, and anyone who is guaranteeing a loan. This helps the SBA to determine risk and overall eligibility.

The amount of information required for this form is relatively extensive. It includes a wide array of information about your personal finances, including bank account balances, proof of income, retirement account information, the value of any major purchases (including homes and cars), personal investments, and your total debt load, including credit cards, outstanding loans, additional debt and any other financial liabilities that you may have incurred. You may have to provide up-to-date statements on all of this information as well, so be prepared to find that information.

This information will be used in a variety of ways. First, it will determine your overall creditworthiness. Like when you apply for any other loan in the real world, the SBA will want to know that you are a sound financial investment and have the financial management skills to actually pay the loan back. They will also want to know what your personal financial capacity is. This will help the SBA determine if you are worth investing in, and whether or not you are likely to actually pay the loan back.

Filling out the personal financial statement is a requirement before you get any loan from the government. As such, you should be prepared to divulge a great deal of personal financial information.

 

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