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My SBA Loan App Was Rejected Because I filed Schedule C!

by GoBetterTogether, Window Shopper

  • Created: February 5, 2012, 12:46 pm
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I have been working on a new company which is internet based, with a sound competetor profile and a niche need industry.I have done everything necessary to apply, and thought, be approved for a loan for a startup.The business plan and financials are all in order, and I am seeking a loan to get it off the ground. I contacted a local bank, who referred me to their "SBA Expert". Apparently they outsource this process. Maybe its not something they are interested in.After a tedious process of file and doc prep, they returned with an answer of, " You dont qualify because you have filed Schedule c on your taxes" !!!What!? Isnt it my right by tax law to deduct the expenses over the past several years to get the development of the technololgy done?I have invested well over 100K in devloping something pretty extraordinary. I have used my own payroll and savings to do so. This approach has given me a net loss over these years of development as I could not launch until product was complete. That day ahs arrived.It seems out of line with the concept of what the SBA is for. Why should I be disqualified because I applied my losses for R&D?Anyone have any feedback as to if this just might be the banker, or are there actually stipulation within the SBA app process that says this is not allowed? Thanks 

Tags: Discuss Popular Topics, Loans & Grants
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BizResearcher | Window Shopper | 2/15/2012 - 11:23 am

I can think of three possible reasons why your loan application was rejected and there may be more. First, did you register your business name and entity type with your state or county before you filed the Schedule C? A Schedule C is associated with a business, so you would need to have created the business before you incurred deductible expenses. If you filed the Schedule C without an associated business, you could be audited by the IRS. Second, if you applied for a loan for start-up financing, but have filed Schedule C for several years, then in reality you are not a start-up. You would need to reapply for an operating capital or some other type of loan. If you are planning to operate the business from your home, it is diffiicult to obtain start-up funding for such ventures because there is little collateral to secure the loan - little or no real estate, buildings, equipment, machinery, etc. When the start-up is homebased, if you can secure a loan, you may have to pledge your home, assuming you own it, or other property as collateral.