SBA loans are one of the most popular ways for small business owners to secure affordable financing. Features like low interest rates and extended SBA loan repayment terms make funding more accessible, but they also create high demand, so competition for loan approval can be steep.

The loan application requires careful attention to detail. Accuracy is critical, and you’ll need to follow a clear set of steps. Otherwise, a single mistake could derail the process, costing you time and potentially leading to a loan denial.

Understanding exactly how to get an SBA loan approved and the top application mistakes to avoid could be the difference between securing the funds you need and starting over from scratch. Here’s what you need to know.

SBA loan applications require extra attention.

The SBA loan application process is more detailed than many expect. SBA financing has stricter requirements, leading to more paperwork and additional layers of review.

It’s important to note that the SBA does not issue loans directly. Instead, it partners with approved banks, credit unions, and online lenders that follow SBA guidelines for evaluating and processing applications.

The process typically starts with gathering financial documents, completing SBA-specific forms, and outlining a clear plan for how you’ll use the funds. Then, the lenders are required to verify every detail of your application and make sure your business is a solid credit risk. To pass this examination, it’s important to submit a complete, accurate, and well-documented application.

Common SBA loan application mistakes to avoid.

Even businesses with solid backgrounds and strong credit profiles can sometimes get tripped up during the SBA loan application process. Here’s a look at some of the most common mistakes business owners make, and how to avoid them.

Incomplete or disorganized documentation.

Lenders need a full picture of your business before they can approve your loan, so you’ll need to provide every requested piece of documentation. This includes:

  • SBA Form 1919
  • Recent tax returns
  • Financial statements
  • Your business plan
  • A clear breakdown of how you’ll use the funds

Failing to provide these items can slow down your approval and could stop it altogether. Avoid this common mistake by creating a checklist and reviewing everything with a trusted advisor before hitting submit.

Underestimating the importance of credit.

When you’re applying for a business loan, your personal credit doesn’t matter—right? Actually, when you’re dealing with SBA loans, that’s not the case. Your personal credit history helps lenders evaluate risk, so that’s typically one of the first things they’ll look at. Make sure you’re prepared by reviewing your most recent credit report well ahead of time. This can help you identify errors or other issues that need to be addressed before you apply.

Overstating financial projections or revenue.

It’s tempting to present big growth numbers, especially when you’re excited about the direction your business is headed. But if your projections aren’t based on verifiable data or market trends, they can raise red flags. Lenders want to see realistic, well-supported forecasts, so be honest about your revenue. Back up your projections by explaining your assumptions and showing that while your goals are ambitious, they’re also grounded in reality.

Lack of clear loan purpose.

SBA lenders want to know exactly where the money is going and how it will help your business grow or stabilize, so vague or inconsistent explanations for how you’ll use the funds could raise more red flags.

The more specific your answers, the better. Whether you’re planning to use the funds for payroll, equipment, or working capital, make sure you can show that each dollar is tied to a clear business goal. This shows that you’ve given it plenty of thought and will use the money to make smart business moves.

Ignoring debt-to-income or debt-service coverage ratios.

Make sure you’re realistic about how much debt your business can afford to repay. Before approving a loan, SBA lenders look closely at your debt-to-income (DTI) and debt-service coverage ratio (DSCR). These calculations help assess your ability to handle an additional loan. If the numbers don’t make sense, they may deny your application, even if everything else checks out.

Before submitting your SBA loan application, carefully run the numbers and make sure the amount you’re requesting aligns with what your business can reasonably support.

Not understanding the SBA loan type you’re applying for.

Applying for the wrong type of SBA loan can delay your application or lead to a mismatch in funding. For example, an SBA 7(a) loan may work well for general business needs, while a 504 loan is better suited for purchasing real estate or equipment. And if your business is fairly new and you meet the requirements, you may benefit from applying for an SBA Microloan instead.  

To avoid this mistake, take the time to research your options or meet with a loan advisor who can help you choose the program that best fits your business goals.

Skipping the business plan (or submitting a weak one).

A strong business plan shows lenders where your business is headed and how you’ll get there. Generic, outdated, or incomplete plans can lead lenders to believe you haven’t fully thought through your strategy or aren’t committed to the long-term success of your business.

Creating a robust business plan is well worth the time and effort it requires. Make sure your plan includes your current financials, clear growth strategies, and a thorough competitive analysis. Demonstrating that your business plan aligns with the loan request helps lenders see that you’re thinking strategically and ready to use the funds with purpose.

Strengthen your SBA loan application.

Once you’ve sidestepped the most common SBA application mistakes, there are a few additional things you can do to make sure your submission is as strong and lender-ready as possible. Taking these steps can help speed up the process and may boost your chances of approval:

  • Stay organized: Keep all of your paperwork in a digital folder so it’s easy to access and update
  • Work with a professional: An accountant or small business advisor may help spot missteps before you submit
  • Be transparent: Most challenges will come up during the review process anyway, so it’s better to be upfront. Let lenders know what you’ve overcome and how your business is stronger because of it
  • Double check everything: Review the SBA’s official borrower checklist and lender guidelines before submitting your application

A complete, well-prepared application shows lenders you’re serious, and may make it easier for them to say yes.

Use the SBA application process to strengthen your business.

SBA loan application mistakes are fairly common. Even experienced business owners can miss a step, but with the right preparation, most errors are avoidable.

The application process is about more than completing paperwork. It’s an opportunity to polish your business plan, get a clear picture of your financials, and build confidence in exactly what you’ll do with the funds. Not only will this level of clarity help improve your chances of approval, but it can also help you run a more successful business.

Take the next step toward reaching your business goals. Explore SBA loan options with Lendio and check your eligibility today.