Navigating the world of small business financing can be daunting, especially when it comes to understanding the myriad of documents required for loan applications. One such document, the SBA Form 413, plays a crucial role in determining your eligibility for a Small Business Administration (SBA) loan. But fear not, because we’re here to help you break down this seemingly complex form into a simple, step-by-step guide that will empower you to complete it with confidence.
By the end of this blog post, you’ll have a comprehensive understanding of the role of SBA Form 413 in the loan application process, its key components, and how to avoid common mistakes while filling it out. So let’s dive in and demystify SBA Form 413, setting you on the path to securing the financing your small business needs.
- SBA Form 413 is an important document for assessing creditworthiness and repayment ability in SBA loan applications.
- It consists of personal information, assets and liabilities, income sources, contingent liabilities, and other key components.
- Accurately completing the form is essential to ensure successful loan approval or explore alternative financing options if denied.
The Role of SBA Form 413 in SBA Loans
SBA Form 413, also known as the Personal Financial Statement, is an essential document for those seeking an SBA loan. It serves as a tool for lenders to evaluate an applicant’s creditworthiness by analyzing their personal finances. This comprehensive assessment of your financial situation helps lenders determine your repayment ability, making it crucial to accurately account for all your assets when completing the form.
Be warned, providing inaccurate figures on SBA Form 413 may lead to fines, legal judgments, and even rejection of your loan application.
The Connection to SBA 7(a) Loans
SBA Form 413 is required for the majority of SBA loan applications, including the popular SBA 7(a) loan program. The 7(a) loans offer a maximum borrowing limit of $5 million, making them an attractive financing option for small businesses seeking substantial funding. These loans typically have a maximum term of 10 years, providing ample time for repayment.
Additionally, the SBA Community Advantage loans, a subset of the 7(a) program, offer a maximum borrowing amount of $250,000, catering to businesses with smaller financing needs.
Key Components of SBA Form 413
SBA Form 413 consists of three main components: personal information, assets and liabilities, and income sources. Each component plays a vital role in painting a complete picture of your financial situation, which is why it’s crucial to gather supporting documentation before you begin filling out the form.
Let’s delve deeper into each component to ensure you have a clear understanding of what’s required.
The personal information section of SBA Form 413 requires you to provide details about yourself and your business, such as your name, contact information, and the type of business entity. This section also includes the Personal Financial Statement (PFS), which evaluates your assets, liabilities, and income that will be utilized to repay the SBA loan.
By accurately filling out this section, you’re providing lenders with a clear snapshot of your financial standing, making it easier for them to assess your creditworthiness.
Assets and Liabilities
In the assets section of the form, you’re required to list various assets such as cash on hand, savings accounts, retirement accounts, life insurance cash surrender value, stocks and bonds, real estate, automobiles, and other personal property. It’s important to be thorough and precise when listing your assets, as they play a significant role in determining your overall net worth.
The liabilities section, on the other hand, is where you must record all your outstanding debts, including balances on personal credit cards, auto loans, personal installment loans, mortgages on owned real estate, and unpaid taxes. Remember, accuracy is key when filling out this section, as any discrepancies may lead to delays or even disqualification in the loan application process.
To ensure that you provide the most accurate information possible, gather supporting documentation such as bank account statements, retirement account statements, life insurance documents, pay stubs, and loan statements before you begin filling out the form. This will not only help you accurately complete the form, but also provide lenders with the necessary documentation to verify your financial situation.
The income section of SBA Form 413 is designed to provide lenders with information about your various sources of income, which in turn aids in determining your creditworthiness. This section requires you to list your salary, net investment income, real estate income, and any other sources of income you may have. It’s important to be thorough when listing your income sources, as they play a crucial role in determining your repayment ability.
In addition to income, SBA Form 413 also requires you to disclose contingent liabilities, which are potential debts that you may become responsible for if certain conditions arise. Examples of contingent liabilities include outstanding debts for which you acted as a guarantor, potential amounts owed for pending legal claims, and any other outstanding contingent debts. By providing a comprehensive picture of your income and potential liabilities, lenders can better assess your financial situation and make an informed decision on your loan application.
Who Should Complete SBA Form 413?
Not everyone involved in a small business is required to complete SBA Form 413. The form must be completed by proprietors, general partners, managing members, and owners with 20% or more equity in the business. This ensures that the key decision-makers and stakeholders in the business are evaluated for their financial standing and ability to repay the loan.
SBA Form 413 is a requirement for the following SBA loan programs:
- Disaster loans
- Surety bond guarantees
- Woman-owned small business certification
- 8(a) business development program
Preparing to Complete SBA Form 413: Gathering Documents
Before diving into filling out SBA Form 413, it’s crucial to gather all the necessary documents that will help you accurately and efficiently complete the form. These documents include bank account statements, retirement account statements, life insurance documents, pay stubs, and any other statements for income sources and outstanding debts. Having these documents on hand will not only make the process of completing the form smoother, but also ensure that the information you provide is accurate and up-to-date.
If you’re unsure about which documents to gather or need additional documentation, it’s always a good idea to reach out to your lender for guidance. They can provide you with a comprehensive list of required documents and clarify any questions or concerns you may have.
Step-by-Step Guide to Filling Out SBA Form 413
With your documents in hand, you’re now ready to begin filling out SBA Form 413. Start by entering your personal and business information in the designated section, including your name, contact details, and the type of business entity.
Next, list your assets and liabilities in their respective sections, ensuring that you’re thorough and accurate in your reporting.
Finally, provide details about your sources of income and any contingent liabilities in the designated sections. Once you’ve completed all sections of the form, sign and date it to verify that the information provided is accurate and complete. Remember, double checking your work is essential to avoid any delays or issues in the loan approval process.
Common Mistakes to Avoid When Completing SBA Form 413
Filling out SBA Form 413 may seem time-consuming and complex, but by being diligent and cautious, you can avoid common mistakes that may hinder your loan application process. One common mistake is not filling in every required section or providing inaccurate figures on the form. To avoid this, double-check all the information you provide and ensure that your supporting documents are current and accurate.
Another mistake to avoid is overlooking assets or underestimating their value. It’s important to include all your assets when completing the form, as this provides the lender with a comprehensive understanding of your financial situation. By being thorough and accurate in your reporting, you increase your chances of a successful loan application.
Submitting Your SBA Form 413
Once you’ve completed SBA Form 413 and double checked all the information, it’s time to submit the form to your lender along with any other required documents. These may include bank account statements, retirement account statements, life insurance documents, pay stubs, and loan statements.
By submitting your SBA Form 413 and supporting documents, you’re providing your lender with a clear picture of your financial situation, which will help them make an informed decision about your loan application. Remember, transparency and thoroughness are key to a successful loan application process.
How SBA Form 413 Affects Loan Approval
The information provided in your SBA Form 413 plays a crucial role in the loan approval process. Lenders use the form to evaluate your creditworthiness and assess your assets, which helps them determine your ability to repay the loan. By accurately completing the form and providing a comprehensive picture of your financial situation, you increase your chances of securing the financing your small business needs.
It’s important to remember that the loan approval process is not solely based on your SBA Form 413. Other factors, such as your credit history and business plan, may also affect the final decision. However, submitting a complete and accurate SBA Form 413 is a critical step in demonstrating your financial stability and commitment to repaying the loan.
Alternative Financing Options if Denied an SBA Loan
If your SBA loan application is denied, don’t lose hope. There are alternative financing options available for small businesses seeking funding. One option is to explore alternative lending platforms that offer loans to small businesses. These platforms can provide more flexible terms and may have less stringent requirements than traditional SBA loans.
Another option is to consider government small-business loans, which are typically issued by approved lenders and backed by the government. Popular options for such loans include SBA and USDA loans. Additionally, entrepreneurs can consider non-traditional lenders and grants from the federal government.
By exploring these alternative financing options, you can still secure the funding your small business needs to grow and succeed.
Navigating the world of small business financing can be challenging but understanding the role and importance of SBA Form 413 is a crucial first step in securing the funding your business needs. By accurately completing the form and providing a comprehensive picture of your financial situation, you increase your chances of a successful loan application.
Remember, it’s essential to gather all necessary documents, double-check your work, and submit your completed form to the lender along with any other required documents. And if your SBA loan application is denied, don’t despair – there are alternative financing options available to help your small business thrive.
As you embark on this journey of small business financing, remember that knowledge is power. Armed with the information and guidance provided in this blog post, you’re now better equipped to tackle SBA Form 413 and secure the financing your business needs to succeed. So, go forth and conquer the world of small business financing, and watch your business grow and flourish.
Frequently Asked Questions
What is an SBA form 413?
SBA Form 413 is an essential form for obtaining an SBA loan or surety bond. It provides information to the SBA that will help them analyze an applicant’s repayment ability and creditworthiness to make a decision on the loan or surety bond application.
What is a personal financial statement for SBA loan?
A Personal Financial Statement for an SBA loan is a document required by the U.S. Small Business Administration which outlines an individual’s assets, liabilities, and sources of income. This form helps lenders assess the creditworthiness and repayment ability of applicants so they can make informed decisions about their loan requests.
Is completing Form 413 accurately a requirement?
Yes, in fact material misstatements and/or fraud could result in criminal prosecution. Right above the signature line on Form 413, the applicant certifies with a signature “I certify under penalty of criminal prosecution that all information on this form and any additional supporting information submitted with this form is true and complete to the best of my knowledge.” We recommend completing Form 413 in consultation with your accountant and/or financial advisor. Keep note that other information provided to SBA lenders during the application process should be materially correct as well as providing fraudulent information to banks to obtain financing is bank fraud, which is a federal crime.
For an SBA loan, what other information do I need to provide?
Each SBA lender’s requirements will be slightly different, but most require the following in addition to Form 413:
- Most recent 3 years filed Corporate Returns on Subject Business
- Current year interim and prior year annual financial statements (Profit & Loss & Balance Sheet)
- SBA Form 1919 for 7(a) loans
- Schedule of Liabilities (sample)
- Resume and management profiles on all >20% owners or LinkedIn Profile
- Brief Synopsis of the potential deal structure (project amount, seller financing, etc.).
- If an acquisition, term sheet, letter of intent, and/or purchase agreement.