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Here's an overview of how SBA loans work, the types of SBA loans available, what each loan type can be used for, and how to get an SBA loan for your small business.
We start with a quick survey to better understand your business's unique needs.
Once we have found your personalized match, our team will be happy to discuss the further process.
SBA loans are small business loans that can help cover startup costs, working capital needs, expansions, real estate purchases, and more. This type of loan is issued by a private lender but is supported by the federal government, specifically the Small Business Administration.
The SBA requires an unconditional personal guarantee from everyone with at least a 20% ownership interest in a company. This guarantee puts you and your personal assets at risk of paying if the company is unable to pay.
Both government guarantees and personal guarantees reduce risk for lenders and make them more willing to work with small and medium-sized businesses.
Once an SBA loan is approved, the lender is responsible for completing the loan and disbursing the loan proceeds. You usually make monthly payments directly to the lender.
Here's an overview of the most common types of SBA loans.
working capital, expansion, and equipment purchases;
Quick financing for working capital, expansion, real estate and equipment purchases.
Up to $5 million (up to $5.5 million for some projects).
Purchase long-term fixed assets such as land, machinery, and equipment.
|
program |
loan size |
the purpose |
|---|---|---|
|
Up to $50,000. |
working capital, inventory, supplies, equipment and machinery; |
|
|
Up to $2 million. |
Repair physical damage caused by a declared disaster and cover operating costs. |
|
|
SBA Export Working Capital Loan |
Up to $5 million. |
Working capital to support export sales. |
|
SBA Export Express Loan |
Up to $500,000. |
Prompt funding to strengthen export development of enterprises. |
|
SBA International Trade Loan |
Up to $5 million. |
Long-term funding to expand export sales or modernize to compete with foreign competitors. |
competitive rates
Note that the annual percentage rate of a loan is different from the interest rate. APR is a percentage that includes interest plus all loan fees.
15
%, while major online small business lenders that do not offer SBA loans offer loans with APRs as high as 99%.
low price
long term
Another advantage of SBA loans is that they take longer to repay. This means you have more funds available for other business needs. The loan term varies depending on how you use the money. The current maximum maturities are:
large amount of loan
These are much higher than the loan amounts typically offered by online lenders and banks, typically with maximum amounts of $500,000 and $1 million, respectively.
difficult to qualify
Although government guarantees reduce the risk lenders face when issuing loans to small businesses, they still must meet strict eligibility criteria to receive an SBA loan. Typically, you need several years of business experience, solid business finances, and a good credit history to qualify.
Funding is slow
Depending on your financial institution and the type of SBA loan you apply for, it may take one to three months to access your funds. Additionally, the SBA loan application process is detailed and requires extensive documentation.
Some form of collateral is required
What do I need to qualify for an SBA loan?
SBA loan requirements vary by lender and specific loan program, but qualifying typically requires several years of business experience and a good credit history. Additional criteria from the SBA include:
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Must be operating a commercial business in the United States
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Business owners must invest capital such as their time and money into their business.
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You must be able to demonstrate the need for financing and demonstrate the business purpose for which the funds will be used.
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You must be able to prove your creditworthiness, that is, your business has the means to repay the loan.
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Before resorting to an SBA loan, you've probably tried obtaining financing from non-governmental sources.
1. Make sure your business is eligible
To qualify for an SBA loan, lenders typically want to see at least two years in business, high annual revenue, and a good credit score starting around 690.
If your business is experiencing difficulties, an SBA loan is probably out of the question. Additionally, you should not apply if you fall into any of the ineligible categories, such as gambling or political lobbying.
2. Choose a lender
If you're applying through a traditional bank, it helps to work with a bank that has a history of processing SBA loans. Ask your potential lender the following questions:
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How many SBA loans do you originate?
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How often should I fund my SBA loan?
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How experienced is your staff in this process?
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What is the amount of loan you will make?
In general, banks with multiple years of SBA experience will be able to provide better guidance, including letting you know your chances of getting approved. The bank follows his SBA guidelines but uses its own underwriting criteria to evaluate loan applications.
Newtek is also an SBA preferred lender. The preferred lender can make a final credit decision without sending your loan application to her SBA, speeding up the underwriting process.
3. Gather your documents
Some of the required documents are listed below.
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SBA Borrower Information Form.
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Personal Biographical Statement.
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Personal financial statements.
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Business financial statements.
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Individual income tax return.
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Business tax return.
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business license.
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Loan application history.
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Business owner resumes.
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Lease agreement if applicable.
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One year cash flow forecast.
4. Submit your application and wait
If you are short on time, an SBA Express loan is a good option. Usually funded faster than other options. The maximum amount for this type of loan is $500,000, and the maximum amount guaranteed by the SBA is 50%.
Learn more about obtaining an SBA loan.
FAQ
SBA stands for Small Business Administration. It is a federal agency dedicated to helping small businesses in the United States, providing assistance through counseling, access to government contracts and loans, and more.
Yes, you must repay your SBA loan. However, the loan terms, or the period of time you have to repay the lender, tend to be longer than other types of business loans.
Loan limits vary depending on the type of SBA loan. SBA 7(a) loans are available up to $5 million. CDC/504 loans are available up to $5 million, with some projects offering up to $5.5 million. SBA Express loans are available for up to $500,000 and microloans are available for up to $50,000.
