SBA Microloan Program
The typical Microloan borrower profile is a micro-enterprise that may be a startup. This borrower may have had credit problems in the past and is likely not a candidate for a bank loan.
Lender: Non-profit lenders approved by SBA
Maximum Loan Amount: $50,000
Interest Rate: Fixed average 8%
Maximum Loan Term: 6 years
Fees: Up to 2% of loan amount
Collateral: varies from lender, personal guarantee is likely
Typically used for: working capital, supplies, equipment, furniture & fixtures
SBA 7(a) Guaranty Loan Program
The typical 7(a) borrower profile is an existing business, although startups are eligible. For each owner, 20% or more of the business, personal credit must be satisfactory (no recent bankruptcies). Personal credit score must meet lender's minimum requirement.
Lender: Banks and Credit Unions
Maximum Loan Amount: $5 Million
Interest Rate: Generally Prime +2.75%
Maximum Loan Term: 10 years (25 years for real estate)
Fees: 2% - 3.75% of guaranteed amount
Collateral: Personal Guaranty of 75% - 85% of loan amount
Typically used for: working capital, inventory, equipment, real estate, debt refinance, acquisition, franchise.
SBA 504 CDC Loan Program (Certified Development Companies)
The typical 504 borrower profile is a seasoned business that can demonstrate repayment ability from historical cash flow. Owners have sufficient personal assets to cover a minimum 10% down payment. These borrowers may be seeking to avoid uncertainty of lease renewals and rent increases, and benefit from commercial real estate ownership. The 504 is usually introduced after a mortgage lender is on board to finance the project property.
Lender: Non-profit CDC approved by SBA
Maximum Loan Amount: $1,123,588
Interest Rate: Fixed, about 5+%
Maximum Loan Term: 25 years, fully amortizing
Fees: 3% of loan amount
Collateral: 2nd lien on Project property
Must be a for-profit business
Must qualify as a small business concern
Must be an eligible type of business
Must be at least 51% owned by US citizens or legal permanent residents.
Owners cannot be on probation or parole
SBA Ineligible businesses
Businesses primarily engaged in lending
Life insurance company
Real estate investors and landlords
Pyramid sale distribution plans
More than 1/3 gross revenue from grambling
Private clubs that limit membership
How to Apply for a Loan
The typical loan application will require the following
Prior year’s tax returns
Historical financial statements
3-year pro-forma financial statement forecast
Working capital schedules like Accounts Receivables, Accounts Payable and Inventory.
Personal Assets (for personal guarantees)
Before applying for any type of financing, it is important for businesses to have their books in good order. GFT's accounting services can help get your books ready for a loan application. Continued monthly accounting will help borrowers maintain a healthy relationship with their lenders. GFT corporate finance services can help guide your business with the loan application process.