SBA Loans

SBA Loans

Such loans can be a good solution as they do not require excellent credit and have low interest rates. Also they are easier to qualify than for example bank loans.


Understanding S.B.A.

So, SBA Loan is a type of business financing that was created back in 1953 in order to help small businesses grow and compete in the United States. These loans are backed by the SBA (Small Business Administration), hence the name. The SBA has a network of financial institutions that help them provide money to all industries across the US. More than $100 billion is provided annually to small business owners.

Thus, now entrepreneurs can take advantage of a wide range of services in order to develop their company or increase it. This can include everything from consulting services to loans and grants. It is also worth noting that the SBA does not finance small businesses directly, but provides low-cost loans through other financial institutions such as credit unions and banks.


SBA Loan Requirements

As you know, in order to qualify for a particular loan, you must meet certain eligibility criteria. So, what does it take to get an SBA Loan?

First of all, those businesses that apply for funding must operate for at least two years. It is also often necessary for a business owner to have a good credit of 680 or more. It is important to note that now there are lenders who work with those borrowers whose credit is below 680, however, for this, the business must meet all the requirements. However, you can still get support from Small Business Administration.

What are the SBA criteria for small businesses? In fact, there is no unequivocal answer here as it varies from industry to industry. Most commonly, a small business is defined as a business with fewer than 500 employees and less than $7 million in annual revenue. Specific requirements also vary depending on the type of SBA Loan.

Read more: How To Choose The Right Small Business Loan


What Are The Main Types Of SBA Loans?

As already mentioned, the SBA offers various types of financing for various needs of small businesses. At the moment, the most popular of them are:

  • 7 (a) loans
  • CDC/ 504 loans
  • Microloans
  • CAPLines Loans
  • SBA Export Loans


SBA 7(a) Loan Program

Perhaps the most popular funding program offered by the SBA is the 7(a) Loan. This loan is an SBA-guaranteed asset-based loan that offers financing for a growing or new business. The loan amount can be up to $5 million. Debt repayment terms also vary up to 10 years for working capital loans or up to 25 years for commercial real estate loans. Interest rates typically range from 5% to 8%.

In order to qualify for this type of financing, you must have at least a 680 credit account and make a 10%-20% down payment. In addition, the borrower must also provide some form of collateral, although the loan does not have to be fully collateralized. Personal guarantees are also most often requested.

This loan can be used to refinance debt, working capital, purchase of necessary equipment, purchase of another business or franchise, and so on.


504 Loan Program

This type of financing is created for developers who want to rehabilitate commercial real estate projects located in target areas. These zones are defined by redevelopment agencies which are also called RDAs. So, RDAs work very closely with developers at all stages of the work to ensure that they meet the requirements of the state. Such loans are most often long-term and have fixed interest rates.

The loan amount you can get from the 504 Loan Program is also up to $5 million and repayment terms can be 10, 20 or 25 years. This loan is perfect for owner-occupied commercial real estate purchases or purchases of other fixed assets.


SBA CAPLines Loan Program

This small program offers low interest loans for small businesses. Most often, loans are long-term and finance the purchase or construction or fixed assets. Most often, you will also be able to borrow up to $5 million dollars.

To qualify for this loan, the borrower must also be an eligible business concern. This means an entity that is having a place of business in the United States, organized for profit, operating in the United States or contributing to the US economy, and employing workers who are US residents. Interest rates on this loan are most often between 5.50% and 8%. Repayment terms vary up to 10 years for working capital or contract CAPLines or up to 5 years for builder CAPLines.


SBA Export Loans

The loans also provide small business owners with up to $5 million to expand their export operations and participate in international transactions to enter new markets. Thus, thanks to SBA export financing, various enterprises can receive money that may not be available if Applying for a traditional loan like personal loan. Often, borrowers can get interest rates of 6-10%.

The repayment periods for this type of financing also often range up to 7 years for a line of credit and up to 10 to 25 years for a term loan. In order to qualify for this type of financing, the borrower must have a good credit history of 680 or more, and the business must also be involved in the export of goods or services to other countries.


So, in conclusion, it is worth saying that SBA Loans are a great option for how you can develop your business, since an excellent loan or collateral is not required and most often it is easier to get them than, for example, a bank loan. However, they have a longer turnaround time and most often have fairly strict acceptance criteria. Thus, weigh the pros and cons in order to make the right decision.