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SBA Loan

What is a SBA Loan?

The U.S. Small Business Administration helps small business owners get funding through SBA loans. With their multiple SBA funding programs, this government agency provides SBA loan guarantees of up to 85% of the loan amount provided through an SBA-approved lender. The three main SBA loan programs let you borrow money for nearly any business purpose—including working capital, purchasing inventory or equipment, refinancing other debts, or buying real estate—through these SBA-guaranteed loans.

Maximum Advance Amount

$5,000 – $5,000,000

Loan Term

5 – 25 years

Interest Rates

Starting at 6.75%

Speed

As fast as 3 weeks

PROS

• Lowest down payments

• Longest payment terms

• Reasonable interest rates

• Suitable for a wide range of business purposes

CONS

• Lengthy paperwork

• Longer approval times

• May require collateral

Who Qualifies for an SBA Loan?

Securing an SBA loan is no easy feat…

 

So how can you get one?

 

As it turns out, many businesses—including small or newer ones—can qualify for an SBA loan. The most important factor will be your credit score: SBA loans are for business owners with strong borrowing histories.

 

Be prepared: SBA loans usually require a lot of time, energy, attention, and documentation.

 

Don’t believe any lender who promises to provide SBA loans today: It’s definitely not a loan that you’ll apply to and receive the funding for even within a few days. That said, SBA loans are certainly fit for growing your business and refinancing your other debt at the lowest available rates.

 

You might find it difficult to qualify for an SBA loan if your company has a limited track record or, especially, if your credit is poor. After all, the SBA and your lender are sticking their neck out on the belief that you’re a reliable borrower.

Most customers who were approved had

**Based on past customers.
Annual Revenue

Over $180,000

Credit Score

680

Time in Business

Over 4 years

How to Apply?

There are many large and local banks that offer SBA loans. These bank lenders will have extensive loan applications, looking closely at the financial details of your business. At a minimum, an SBA loan application at a traditional bank will take a couple of weeks to process.

 

For an easier and quicker process, you can apply online to top SBA lenders like Celtic Bank and Live Oak Bank.

Documents you need:
  • Driver’s License
  • Voided Business Check
  • Bank Statements
  • Balance Sheet
  • Profit & Loss Statements
  • Business Tax Returns
  • Personal Tax Returns
  • Business Plan
  • Business Debt Schedule

How Does a SBA Loans Work?

Almost every small business owner wants to know what an SBA loan is, and how to qualify for one. As one of the lowest-cost products out there, SBA loans are the holy grail when it comes to growing your business affordably.

 

But aren’t they impossible to get approved for?

 

At Fundera, we’ve helped thousands of small business owners successfully secure SBA loans. With all that experience—and data—under our belt, we’re confident we can give you the information you need to apply for an SBA loan.

 

By understanding how the product works and what exactly the eligibility requirements are, you’ll know if an SBA loan is the right product for your business.

SBA Loans: The Fundamentals

The “SBA” in SBA loans stands for the Small Business Administration.

The Small Business Administration is a federal agency dedicated to helping entrepreneurs improve their small businesses, take advantage of contracting opportunities, and get better access to conventional small business loans. We’ll focus on the last one here.

The most common misconception about SBA business loans is that the agency lends money to businesses.

 

But actually, that’s now how SBA loans work—the SBA doesn’t directly lend money to businesses. So what is an “SBA loan” if not a loan from the SBA?’, “The SBA uses federal money to guarantee a percentage of loans administered by traditional banks, so those financial institutions have more incentive to lend money to small businesses.

 

Simply put, the SBA backs up a portion of the bank’s small business loan, meaning less risk for lenders. And less risk for lenders means that more small business owners will be considered for the traditional longer-term, lower-rate financing that comes from banks.

 

Because of this guarantee, bankers are more inclined to lend you money even if you don’t fit their strict credit criteria. They can service a whole different set of customers than usual—without making too many sacrifices.

Applying for an SBA Loan

While SBA loans are slightly easier to qualify for than bank loans, remember: you’re still working with a bank in the end. And banks are nothing if not slow.

At plenty of major banks, getting an SBA loan can still be a lengthy, complicated process. Lenders want to review your credit and financial statements, and could expect you to have collateral to secure the loan. They’ll also look at a handful of other documents—from legal documents, to business plans.

Even with the government guarantee on their side, many small businesses don’t wind up qualifying for SBA loans. And if they do, the process could take months.

On the other hand, an SBA loan’s low interest rates and long repayment terms are almost always worth the wait.

 

What is the actual application like? Here’s the deal:

 

When applying for SBA financing, you can expect to complete an extensive loan application. You’ll need to provide documents like financial statements, information on your collateral, a description of your business, and a statement of how you’ll use the loan proceeds, among others.

 

The participating bank will look for applicants with great credit, a solid business plan, profitable businesses (most the time, not always), and a demonstrated ability to repay the loan.

 

Your borrowing history is especially important to the bank you’re working with for an SBA loan.

How to Choose the Right SBA Loan Program

There are many different types of SBA loans out there, with 3 programs being the most popular:

 

  • The 7(a) Loan Program
  • The Microloan Program
  • The CDC/504 Loan Program

 

How do you know which one is right for you?

 

The SBA loan program you’ll want to apply for depends on the size, age, and goals of your business.

 

The most popular program is the SBA 7(a) loan, which works best for most businesses with general financing needs—like expanding working capital, refinancing old debt, or renovating a location. Here are the details of an SBA 7(a) loan:

 

  • Up to $5M in loan amount
  • Repayment terms of up to 7 years (for working capital loans) or up to 25 years (for commercial real estate loans)
  • For general business financing needs

 

The CDC/504 loan is another popular program, but a little more specific: A CDC/504 loan is used to purchase major fixed assets—mostly large equipment and commercial real estate. Here are the details of a CDC/504 loan:

 

  • Up to $5.5M in loan amount
  • Repayment terms of 10 or 20 years
  • For the purchase of major fixed assets

 

Finally, the third popular SBA loan program is the Microloan program. The SBA offers microloans to small or newer businesses searching for loans under $50K. While these loans are smaller, they’re not really considered short-term loans as term lengths can get extended over a long period of time. Here are the details of SBA microloans:

 

  • Up to $50K in loan amount
  • Repayment terms of up to 6 years
  • For starting or expanding a small or newer business

 

If you’re feeling unsure about which SBA loan program makes sense, Fundera can walk you through your options and help you decide which program is right for you—and whether you’ll qualify.

 

And if you’re not there yet, we’ll work with you to graduate your business up to an SBA loan—one of the longest-term and most affordable business loan options out there.

Not sure which SBA loan is for you?

Let us walk you through your options and help you decide which program is right for you.

Not ready for an SBA loan yet?

We can help you find a solution to your financing needs right now, and help you graduate to an SBA loan in the future.