Funding Solutions
SBA Loans
WHat is a
SBA Loan?
An SBA loan refers to a loan that is guaranteed by the U.S. Small Business Administration (SBA), a government agency that provides support to small businesses. The SBA doesn’t directly lend money to small businesses but rather guarantees a portion of the loan provided by participating lenders, such as banks, credit unions, and certified lenders. This guarantee reduces the risk for lenders, making it easier for small businesses to access financing.
The most common SBA loans are the 7(a) Loan Program, which is the SBA’s primary program and provides loans for general business purposes, and the CDC/504 Loan Program, which is focused on providing financing for the purchase of major fixed assets like real estate and equipment. The terms and conditions of SBA loans can vary depending on the specific loan program and the lender involved.
How Are They Used?
The SBA loans are used for the following purposes:
Starting a New Business, Business Expansion, Working Capital, Equipment Purchase, Real Estate Purchase, Debt Refinancing, Franchise Financing, Crisis or Recovery.
About (SBA) 504 Loan Program which is designed to help small businesses acquire fixed assets, such as real estate or equipment. If a business is seeking financing to acquire a property, the business is generally required to occupy at least 51% of the total usable square footage of the property.
The SBA 7a Loan Program often looks for owners to have a reasonable amount of equity invested in the business. This shows the owner’s commitment and helps mitigate the lender’s risk. The 7a is more flexible, allowing funds to go toward your business needs and carries a 5 to 7-year term.
Funding Options
Real Estate
Purchase real estate for your business with a 7a or 504 loan backed by the SBA allows you to acquire or refinance commercial properties, such as offices, retail spaces, or manufacturing facilities. It allows businesses to secure financing with favorable terms, including lower down payments and longer repayment periods. It involves more documentation compared to some other types of loans and a bit longer process to fund.
Equipment
Small businesses can get the equipment they need with an SBA 7a or 504 loan. Allowing the qualified business owner to obtain a large loan to get the equipment needed to scale their business with fixed or variable interest rates capped by the SBA.
Working Capital
When your small business is tight on cash and expenses keep rolling in, it might be time for an SBA 7a working capital loan. Businesses may use this type of loan to cover day-to-day operating expenses, such as payroll, rent, utilities, inventory and more. Even though this application process is more comprehensive than other loans it is worth the terms.
FAQ’S
Q. HOW LONG DOES THIS PROCESS TAKE?
The SBA loan process duration varies but generally takes several weeks to months. It depends on factors like application preparation, lender review, SBA processing, approval, and disbursement. Timeliness is influenced by document readiness, lender responsiveness, and the loan complexity.
Q. HOW CAN I QUALIFY FOR AN SBA LOAN?
Qualifications do vary and do come with restrictions. The number of employees as well as the annual revenue and net worth are considered for this kind of loan.
Q. DO I NEED TO HAVE GOOD CREDIT TO QUALIFY?
Your credit history is a key factor in the decision-making process, reflecting your past responsibility with credit. However, the SBA doesn’t solely rely on your credit score; they also take into account other factors and special circumstances during their evaluation.
Q. WHEN IS AN SBA LOAN NOT THE RIGHT FIT?
If you are seeking a loan for any of the following businesses—casinos, real estate agencies, rare stamp and coin dealers, religious organizations, and nonprofits—unfortunately, you are not eligible for SBA funding. Specifically, regarding real estate SBA loans, eligibility is contingent on occupying 51% or more of the property.
Advantages
Interest rates are controlled by the SBA.
Get funding even if you’ve been turned down before.
Fixed and variable rates are available.
Low down payments.
