How to Cancel Your SBA Loan Application

We are living in unprecedented times. Many small business owners have been forced to close their doors – some for good. Others have been fighting tooth and nail to secure funding so that they can keep their doors open.

Many small business owners have utilized an SBA (Small Business Administration) loan to assist them in keeping their business afloat. If you’re unsure what an SBA loan actually is, we’re going to explain it in detail. You may find that it provides the help you need to do what’s best for you and your goals.

With that being said, there are some business owners who have taken out an SBA loan, only to determine that they no longer need it. What are you supposed to do with a loan that you have no use for?

You’re not alone, as many business owners just like you have found themselves in similar positions and would just as soon cancel their SBA loan application altogether. Fortunately, canceling is a quick and easy process. Although it may take quite some time to process (volumes are abnormally high at the moment), you can cancel your loan.

So be sure to stick around to learn more about SBA loans and what channel to go through if you wish to cancel your application.

What is an SBA Loan?

An SBA loan is a small business loan. Since it is partially guaranteed by the government, there aren’t the same kind of risks involved for the bank that is issuing the loan that you might find with a third-party lender.

That said, it’s important to be clear that it isn’t the SBA that’s lending you money. You see, the SBA is networked with approved financial institutions (most of which are banks) that agree to lend money to small businesses.

These loans are administered much more frequently. What’s more, they also come with better terms due to the SBA partially guaranteeing the small business loans. What does this mean, exactly?

In short, it means that the SBA will make some of the payments to the lending financial institution in the event that you default on your payments. When you agree to take out an SBA loan, the SBA provides a set amount that they agree to be responsible for. 

And this is what makes SBA loans so invaluable to small businesses. As we mentioned above, traditional loans have more risks involved, such as the borrower not paying back the lender. Due to these risks, it can be very challenging for some businesses to secure financing from lenders.

However, the SBA steps in and tells the lender, “Hey, we’re a government agency and we guarantee that you will get paid back X amount if the borrower stops making payments on their loan.” 

That’s a lot more enticing to the lender. Moreover, the SBA will sometimes even guarantee to pay back as much as 85% of your small business loan. So as you can see, there are far fewer risks involved with SBA loans. And as such, you are much more likely to get the funding you need.

Getting a loan through other sources often comes with terms that aren’t attractive in the slightest. That’s why, if you’re going to get a small business loan, you should try getting it through the SBA first.

If that doesn’t pan out, then you can try your luck elsewhere. The problem with getting an SBA loan is that they are very strict. Being a government entity, you can bet your bottom dollar that they are going to go over your application with a fine-tooth comb.

Because of this, your application may be denied and you’ll have to go with a third-party company with those unattractive terms – and that’s assuming you qualify for a loan with them.

As a small business owner, you may or may not be pressed for finances at the moment. If you are in the former camp, prepare to play the waiting game. Due to the SBA’s lengthy application process, you should expect to wait weeks before you hear anything back.

What’s more, you’re going to need a lot of paperwork and documentation. Below, you will find a comprehensive list of items that the SBA will want from you when applying for a small business loan.

  • Profit and loss (P&L) statements
  • Personal background statement
  • Business income tax returns 
  • Personal credit report 
  • Business credit report
  • Professional resume
  • Legal documents
  • Bank statements
  • Balance sheets
  • Debt schedule
  • Business plan
  • Credit score
  • Tax returns
  • Use of loan
  • Collateral

As you can see, there’s a lot involved. If you need results sooner, you may have to opt for another company to assist you in getting a small business loan.

What Are the Terms of an SBA Loan?

Your terms can vary wildly depending on how your business qualifies and the lender that you ultimately decide to work with. And as with other loans, an SBA loan varies in amounts offered to small businesses.

SBA loans can be as little as $500 or as much as $5.5 million, while Annual Percentage Rates (APRs) can be as little as 6.5%. While 10 years is the standard amount of time for repayment terms, they can range between 5 and 25 years. 

As great as all of that sounds, it’s important to remember that an SBA loan isn’t a speedy process. At a minimum, you aren’t likely to hear anything back for at least 3 weeks. And that’s with an application that goes through the government pipeline quickly and efficiently. 

Again, if you’re in a tight spot and you need funding assistance right away, you may want to avoid the SBA loan application process and stick with an organization that can get you faster results. You will likely pay more in the long run, but you should get the financial support you need much sooner.

SBA Loan Requirements

As you read a moment ago, there is a lot of documentation that the SBA will need from you when you apply for a loan. As such, it can be hard for some small businesses to get approved. On top of the items outlined above, the SBA also has some minimum requirements in place.

First of all, your small business will need to have been in operation for at least two years. Secondly, as the business owner, you will personally need to have a credit score of at least 640. 

And lastly, your small business will have to make at least $100,000 a year. If you and your small business meet these requirements, you should most definitely look into getting an SBA loan.

While fulfilling the above requirements isn’t a sure-fire guarantee that you’ll get approved, you do stand a much better chance of securing funding.

You want to be sure to double-check your documentation and application. Any errors could cause your application to be delayed even further. Just as the SBA will go over it with a fine-tooth comb, you want to do the same before submitting anything. 

This will ensure that your application goes through the necessary channels quickly and efficiently. If everything checks out, you can look forward to getting a response shortly after your paperwork is reviewed.

Canceling Your SBA Loan Application

What if you applied for an SBA loan but later determined that you no longer need the funding? Maybe business improved to the point where you feel secure in your finances once more. Whatever the case may be, you can rest easy knowing that you have recourse.

Within the SBA’s government website, you will find a section that informs applicants of how they can cancel their application. To do so, simply email a cancellation request to loanresolution@sba.gov. When you send your request, you will need to include both the loan name and number. 

There is currently a lot of interaction with customer support, so it is likely to take some time in processing your request. To help expedite things, you may want to include current contact information so that someone from the government agency can reach you if they have any questions. 

Summary

There are many small businesses that are struggling to make ends meet. Fortunately, you aren’t without options to help you recover. It isn’t always feasible for some business owners, but try to be patient with your application process.

Whether you are applying for funding or you are trying to cancel your application, it’s important to keep in mind that the SBA is currently seeing a volume of customers that is higher than normal. As such, there are bound to be long wait times.

In the meantime, we encourage you to explore our many helpful articles on improving your small business. Here at Seek Capital, we want you to be successful in your business venture. That’s why we strive to provide tips and information that are designed to help you overcome challenges.

 

Sources

https://www.sba.gov/

https://quickbooks.intuit.com/accounting/reporting/income-statement/

https://www.sba.gov/partners/lenders/7a-loan-program/operate-7a-lender

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