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SBA Loan Programs

As a business owner, you may be looking for ways to fund your next project or expansion. One option to consider is a loan from the Small Business Administration (SBA). SBA loans can be a great way to get the financing you need to grow your business. In this post, we'll take a look at some of the different types of SBA loans available and how they can benefit your business. Keep reading to learn more!

SBA Microloan Program

A Microloan is a unique program that provides small business owners with the resources to grow and expand their operations. The typical borrower profile for this type of lending is someone who may have had credit problems in past, but it's likely they are now more able-bodied than before; making them perfect candidates!

  • 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 the loan amount

  • Collateral: varies from lender to lender, a 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 of the company, 20% or more must be satisfactory personal credit (no recent bankruptcies). The lender's minimum requirement for a good score will depend on what they're looking for in their borrowers- but it shouldn't have been too hard to get approved if you follow these guidelines!

  • 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, and 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

SBA Eligibility

  • 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 of gross revenue from gambling

  • Private clubs that limit membership

  • Speculative businesses

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.

  • CAPEX schedules

  • Business Plan

  • Personal Assets (for personal guarantees)

Looking for financing options to help your business grow? Check out the SBA loan programs offered through local banks. At Global Finance Teams we can help you get the money you need to succeed. 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.

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