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10 Ways to Ensure Your SBA Loan Closes Smoothly
To avoid any problematic delays or denials, we encourage you to review our list of 10 factors to keep an eye on through the loan application process.
- 1. Responsiveness and Document Preparation
- 2. Outstanding Liens, Judgments, or Past Bankruptcies
- 3. Equity Verification for Down Payment
- 4. Title of Assets
- 5. Life Insurance
- 6. Outstanding Federal Taxes
- 7. Legal and Insurance Requirements
- 8. Entity and Guarantor Documentation
- 9. Construction Project Documentation
- 10. Avoid Major Financial Changes
- Get Financing
The last things you want when taking a new loan for your small business are delays, complications, and headaches.
While the SBA loan process is often relatively straightforward, there are several areas that can be speedbumps to those unfamiliar with the closing process.
Review the full list below. If you have any questions, reach out to our expert SBA loan advisory team using the form below.
1. Responsiveness and Document Preparation
One major way to avoid delays is by being as responsive as possible to underwriting and closing requests.
Prepare a Personal Financial Statement on SBA Form 413, gather prepaid equity documents (invoices, credit card statements, and so on), and ensure complete tax returns — both business and personal — with all pages and schedules included. Update your financials as needed, as they will be considered stale after 90 days.
2. Outstanding Liens, Judgments, or Past Bankruptcies
Please make us aware of any outstanding liens, judgments, or bankruptcies. We can help address those issues now — but we can't do anything if they are uncovered in underwriting or during closing. Proactively resolving these issues can prevent delays and potential loan denial.
Providing documentation and working with your lender to create a plan to address these concerns will demonstrate your commitment to transparency and improve the likelihood of your loan closing successfully.
3. Equity Verification for Down Payment
Be prepared to have your down payment sourced and verified. This means the money needs to be in the same account for at least 60 days. Please do not move money around to different bank accounts, as this can needlessly complicate the process.
The equity verification process can be a serious closing matter. Even if you have the correct amount of money at the time of closing, it still needs to have “seasoned” for 60 days in the same bank account.
The best way to do this is to open a bank account early and place the equity in this account to season for 60 days. Keep track of any large deposits coming in and out of your accounts, and retain copies of canceled checks.
4. Title of Assets
Please ensure that if you disclosed an asset on your personal financial statement that you are, in fact, on the title of that asset. Please clarify if that asset is owned by a separate trust or LLC.
Misrepresenting or omitting information about ownership — even if by accident — can lead to complications and delays throughout the whole process. Review all your titles in advance, and be prepared to take any necessary steps to establish your legal claims on these assets.
5. Life Insurance
Most SBA loans will require some amount of life insurance to close the loan. This insurance is there for your protection as a borrower. You do not want to leave the debt to your family in the unfortunate event of your death. Be sure to check your LOI to understand how much life insurance is required for your project.
Life insurance can take 30 to 60 days to secure, especially if you have any preexisting conditions. It is best to start the life insurance process as early as possible. If you don’t have an insurance agent to assist with this, we have several we can recommend.
6. Outstanding Federal Taxes
Most outstanding taxes can be placed on payment plans and considered eligible by the SBA’s ruling. However, some cannot. Please be aware that any payroll taxes (Form 941 liabilities) need to be paid in full before any lender can close your loan.
To address outstanding tax liabilities, contact the IRS or your tax professional to discuss payment plans or other options to resolve these debts. Resolving tax issues in a timely manner can prevent loan delays and ensure a smoother closing process.
7. Legal and Insurance Requirements
Ensure you have the necessary licenses and permits to operate your business (city, county, state, health department, alcohol license, etc.).
Also, make sure you have secured proper insurance coverage. This could include any or all of:
- real estate hazard insurance
- business asset insurance
- liability and workers compensation insurance
- liquor liability/DRAM shop insurance
- 1. Responsiveness and Document Preparation
- 2. Outstanding Liens, Judgments, or Past Bankruptcies
- 3. Equity Verification for Down Payment
- 4. Title of Assets
- 5. Life Insurance
- 6. Outstanding Federal Taxes
- 7. Legal and Insurance Requirements
- 8. Entity and Guarantor Documentation
- 9. Construction Project Documentation
- 10. Avoid Major Financial Changes
- Get Financing
8. Entity and Guarantor Documentation
Be thorough with your entity and guarantor documentation. You will generally need to provide multiple copies of at least two forms of ID (such as a driver's license or passport) for all guarantors.
For the borrower entities and affiliates, you will also need to provide articles of incorporation, operating agreements, EIN (tax ID) letters, and corporate resolutions. Include any assumed name registration documents (DBA or fictitious name filings) from the Secretary of State, if applicable.
9. Construction Project Documentation
If your loan is for a construction project, be prepared to provide full documentation on all project-related expenses — not just the costs of constructing the building.
Your lender will likely require a fixed-price general contractor (GC) contract (on an American Institute of Architects or AIA form), construction project budget and timeline, and SBA Form 601 for GCs or subcontractors paid in excess of $10,000.
That’s not to mention plans and specs, construction permits, architect contracts, FF&E budgets, AIA contractor qualifying statements, GC licenses, GC background experience, subcontractor lists, and insurance coverage.
10. Avoid Major Financial Changes
During the loan process, refrain from making financial transactions that could alter your Personal Financial Statement or overall financial position in any significant way.
Avoid purchasing new properties, making large investments, or taking out other mortgages — these could all impact your liquidity or financial stability. At the very least, it could delay the process while the lender requests additional information to understand your current financial situation.