4 Costly SBA Loan Mistakes (& How to Avoid Them)

Securing a Small Business Administration (SBA) loan can be a great way to fuel your business growth, but the application process can be challenging.

Many business owners make common mistakes that can reduce the amount you qualify for, delay approvals or lead to denials.

Here are the top four mistakes to avoid when applying for an SBA loan:

Not planning ahead
Lack of organization
Poor or delayed communication
Not consulting an expert

Note: Below will not cover eligibility specific issues, read more about how to qualify here and here: Qualifying for an SBA Loan & SBA Loan Eligibility

1 – Not planning ahead

Proper planning is crucial when securing financing. Many business owners wait until they desperately need funding rather than preparing in advance, which will hurt their chances of approval.

Assess your financial needs and goals, by asking yourself:

What specific projects do I want to accomplish?
How much capital do I need?
Can I afford the loan payments?
ROI: What will my return on investment be?

BFG recommends looking at least five years ahead to map out your business’s growth trajectory. Consider when funding will be necessary and how your financials need to align with your goals.

Plan ahead by:

Building and maintaining strong business and personal credit scores
Resolve any potential credit issues or errors that may exist
Optimizing cash flow to demonstrate financial stability
Time your loan application for when your financials are strongest

💡 Key insight: While it’s natural to minimize tax payments, remember that your taxable income is a key factor lenders use to calculate your Debt Service Coverage Ratio (DSCR). Lower reported income will negatively impact your loan approval.

2 – Lack of Organization

SBA loan applications require extensive documentation. A common mistake is underestimating the paperwork needed or submitting incomplete, outdated, or contradictory financial statements.

Lenders value well-prepared borrowers who can quickly and accurately provide the required documents, including profit and loss statements, balance sheets, and projections, and provide a clear justification for how the loan will be used.

Avoid these mistakes during the application process:

Changing the goal post mid-application
Organizational restructuring
Taking on additional debt during the application process, personal or business

3 – Poor or delayed communication

Timely communication is critical when dealing with lenders. Ignoring emails, delaying responses, or missing deadlines can slow the loan approval process—or worse, result in denial.

💡 Practical “Human” Insight: Underwriters handle multiple applications at once. If you take two to three weeks to respond, they may have already moved on. When they revisit your file, they may need to reassess everything, leading to even more delays.

Stay on track by:

Carefully reviewing all loan requirements up front
Submitting all necessary documents on time, or faster
Setting reminders for key deadlines

Important: Some parts of your application are time-sensitive. Financial statements and supporting documents must be current when evaluated by the lender and SBA. Stalling could result in outdated financials, requiring resubmission of multiple documents—not just financials—before moving forward.

4 – Not consulting an expert

Many business owners try to navigate the SBA loan process alone, leading to mistakes that could have been avoided with expert guidance.

Misfiling paperwork, misunderstanding loan terms, or failing to meet SBA guidelines on how loan proceeds should be used can result in delays or denials.

Why work with an expert?

Save time by ensuring all necessary documents are prepared correctly
Understand lender expectations and position your business as a strong candidate
Get tailored advice on loan terms, interest rates, and repayment strategies
Navigate complex SBA loan requirements
Reduce stress by having a knowledgeable professional manage the process

Like most business decisions, proper planning prevents poor performance – SBA loans are no exception.

By avoiding these common mistakes, you can significantly improve your chances of securing the funding needed to grow your business.

It’s never too early to start planning for an SBA loan! Check out our SBA loan calculator to help get started today!

You run your business while we run your loan application.

Call us today for a free consultation.