It is common knowledge in the financing industry that Small Business Association loans are some of the most lucrative financing options available. But many businesses who try to apply for an SBA loan are not approved. This could be for a number of reasons, but typically they made one of a few fatal errors in the application process. Here are the top 3 mistakes made by small business owners when applying for SBA loans.

Being Unsure of Desired Borrowing Amount

It is absolutely imperative when applying for an SBA loan that you know exactly what value loan you are seeking. Being unsure of the value of the loan is a huge red flag to lenders with the Small Business Association. Because an SBA loan is less likely to stipulate how the money is to be spent, a lender is very interested in whether or not you have a specific plan for the money. If they even suspect you are not prepared to spend the money responsibly, you will be rejected very quickly. For these reasons, you must have a specific dollar amount in mind, and a brief explanation for how you plan to spend the money.

Failing To Provide a List of Collateral

When applying for a loan, you must include an itemized list of the collateral available to your business. This is a must-have item for most SBA lenders, as they are particularly interested in what you have to offer up if you fail to pay back your loan within the set term. In this list, be sure to include descriptions of each asset, along with information regarding the estimated value of the asset as well as how the value may change over time. This will dramatically increase your chances of being approved for your SBA loan.

Not Preparing a 10% Down Payment

If you are approved for an SBA loan, the lender will often expect you have a 10% down payment prepared and with you. If you cannot provide this payment on the day of approval, your approval will likely be revoked, and you will be back to step one of the process.

These are the top 3 mistakes made by small business owners when applying for SBA loans. If you have already made one of these mistakes, you will be better prepared for your next application. If you are about to apply for the first time, now you know what to do (and not to do) to increase your chances of approval.