Ability to Repay an SBA Microloan
The SBA Microloan Program works to offer funds to intermediary nonprofit lenders and provides maximum business loans of up to $50,000 to small businesses and startups run by veterans, women or minorities.
The microlenders, like any other financial funding body, care about the ability of the borrowing business to pay back the money on time. There are two ways to demonstrate your ability to pay a loan back— through the cash flow into your business, and through financial projections in case the business does not generate enough revenue yet.
Borrowers are required to submit a business plan in order to be deemed eligible for an SBA microloan. Remember that a business plan is very important, particularly for a business that is not generating sufficient revenue. It is an opportunity to convince the lender regarding why they should trust you and your business to repay in time. These SBA loan requirements dictate the following aspects of your business plan.
- The background of you and your business management
- A clear analysis of your competitors and target market
- Your growth and marketing strategies
- Your financial projections for the upcoming 3 to 5 years
- The value proposition of your business
A clear understanding of your business, its services, and products will help you create a better business plan, and from there, to gain the trust of your prospective lender.