5 Common SBA Loan Mistakes and How to Avoid Them

Applying for an SBA loan is a significant undertaking, and the margin for error is slim. One wrong move can delay your application by weeks or result in an outright denial. The good news? Most mistakes are entirely preventable.

Based on feedback from SBA lenders and thousands of loan applications, here are the five most common mistakes—and exactly how to avoid them.

1 Submitting Incomplete or Inaccurate Documentation

This is the number one cause of SBA loan delays. Missing documents, outdated financials, or inconsistencies between forms can add weeks to your timeline or trigger additional scrutiny.

Common examples include:

Tax returns that don't match business financial statements
Missing signatures on required forms
Outdated financial statements (older than 90 days)
Incomplete personal financial statements

How to Avoid It: Create a documentation checklist before you start. Have your accountant review all financial documents for accuracy and consistency. Use the most current versions of SBA forms and ensure every document requiring a signature is properly executed.

2 Not Checking Your Credit Before Applying

Many applicants are surprised to discover errors, old debts, or lower scores than expected on their credit reports. Finding out during the loan process can derail your application entirely.

Credit issues might include:

Unknown collections or judgments
Errors from identity theft
Incorrectly reported late payments
High credit utilization affecting your score

How to Avoid It: Pull your personal credit report from all three bureaus at least 3-6 months before applying. Dispute any errors immediately—the correction process takes time. Pay down revolving credit balances to below 30% of limits for the best score impact.

3 Applying for the Wrong Loan Amount

Asking for too much—or too little—can hurt your application. Lenders want to see that you've carefully calculated your needs and have a realistic plan for using the funds.

Problems that arise:

Requesting more than the business can support leads to denial
Requesting too little may mean returning for additional financing later
Vague or unsupported funding requests raise red flags

How to Avoid It: Create a detailed use of funds statement that breaks down exactly how every dollar will be spent. Back up your request with quotes, contracts, or market research. Calculate your debt service coverage ratio to ensure you can afford the payments.

4 Choosing the Wrong Lender

Not all SBA lenders are created equal. Some specialize in certain industries or loan sizes, while others have stricter requirements or slower processes. Applying to the wrong lender wastes valuable time.

Lender mismatches include:

Applying to a lender that doesn't fund your industry
Choosing a lender without SBA Preferred Lender status (slower approval)
Working with a lender that has minimum loan sizes above your needs

How to Avoid It: Research lenders before applying. Ask about their experience with businesses like yours, average approval times, and typical loan sizes. SBA Preferred Lenders have delegated authority to approve loans faster—prioritize them when possible.

5 Weak or Missing Business Plan

Your business plan tells lenders the story of your company and demonstrates your ability to repay the loan. A weak plan—or worse, no plan at all—signals that you haven't thought through your business strategy.

Business plan failures:

Generic templates with no specific details about your business
Financial projections without supporting assumptions
No clear explanation of how the loan will be used
Missing market analysis or competitive positioning

How to Avoid It: Even if your business has been operating for years, create or update your business plan for the loan application. Include realistic financial projections with clear assumptions. Explain specifically how the loan proceeds will grow revenue or reduce costs. Have someone outside your business review it for clarity.

Bonus Mistakes to Watch For

Making major financial changes during the application: Don't buy equipment, take on new debt, or make large purchases while your loan is being processed.
Not being honest about challenges: Lenders appreciate transparency. If you have past issues, explain them proactively with what you learned and how you've changed.
Ignoring lender requests: Respond to document requests promptly. Delays on your end delay the entire process.

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Set Yourself Up for Success

The SBA loan process is thorough for a reason—these loans offer exceptional terms, and lenders need to verify you're a good risk. By avoiding these common mistakes, you'll move through the process faster and significantly improve your chances of approval.

Take the time to prepare properly, choose the right lender, and present your business in the best possible light. The effort you invest upfront pays dividends in a smoother process and better loan terms.