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Small business loans through the SBA fall under several categories and while they all have slightly different requirements, there’s a few universal things that you should know about SBA loans.
Generally speaking most SBA loans will require business owners to start by submitting the following:
Plus, for the best SBA loan terms you’ll want to have credit score of 660 or higher and a credit history free of recent bankruptcies, foreclosures, and tax liens.
Loans are available to a wide variety of small businesses interested in purchasing real estate and equipment, acquiring seasonal inventory, or recovering from a natural disaster, just to name a few.
Qualifying for any of these loans starts with meeting the SBA’s size standards for your industry (in terms of number of employees or average annual receipts for the last three years.)
In addition, your business must also:
NOTE: Certain types of businesses, such as those related to gambling, religious teaching, and political lobbying are ineligible for SBA assistance.
Meanwhile, other types of businesses can be subject to various special considerations.
Additional SBA loan requirements vary by loan type– let’s explore these program specifications below:
SBA Grow Loans are for businesses looking to borrow up to $5.5 million to purchase real estate, equipment, or other major fixed assets.
Borrowers must meet job creation, public policy, or community development goals such as revitalizing a business district, expanding a minority-owned business, or contributing to rural development.
Small business owners should expect to offer the assets being financed as collateral and be able to repay the loan in 10 or 20 years.
Have your 10% down payment ready, and apply with a local Certified Development Company, a nonprofit corporation that works with participating lenders to provide small business financing.
The SBA 7(a) loan program is perfect for SMBs needing to borrow up to $5 million for operational expenses, accounts payable, inventory, seasonal financing, contract performance, construction financing, exporting, equipment, machinery, furniture, fixtures, supplies, materials, real estate, renovations, startup costs, expansion costs, or debt refinancing.
One special loan available through the SBA Advantage Loan Program is called an SBA Express Loan.
The SBA Express Loan is great for small business owners borrowing $350,000 or less as a revolving line of credit. Special requirements include demonstrating an urgent need for funding and a willingness to repay the loan within 7 years.
Make sure you’re current with all your existing business debts, set aside some funds for a down payment, and apply for an SBA Loan with a local SBA-approved Community Advantage lender.
The CAPLines Loan Program is technically a sub-category of SBA Advantage Loans, but it’s very important for small businesses that need to borrow up to $5 million (for five years or less) for cyclical working capital.
CAPLines loan funds can be used to cover seasonal gaps in working capital, certain direct construction costs, and some purchase orders.
We recommend business owners pledge accounts receivable, inventory, contracts, or purchase orders to appeal to SBA lenders.
To find out which banks offer SBA revolving lines of credit, use the SBA’s find a lender tool. You can also reach out to the same lenders that participate in the SBA 7(a) loan program to find ones that offer CAPLines loans.
The SBA Disaster Loan Program exists to help small- to medium-sized businesses that must repair or replace real estate, machinery, equipment, inventory, or other assets damaged or destroyed as the result of a declared disaster (some examples include the Tennessee wildfires, Hurricane Matthew, and the Alabama floods).
Qualifying businesses may apply for both types of loans, but note that the combined maximum is $2 million.
Apply directly with the SBA online, in person, or by mail.
You’ll have to pass a credit check of course, and authorise the IRS to inspect your tax returns.
Be prepared to coordinate with an SBA verifier to inspect your damaged property to estimate your total physical losses.
Plus, you’ll be assigned a case manager to help you meet ongoing loan conditions.
Export Loans as large as $5 million are available to provide financing for suppliers, inventory, or production of goods; to support long payment cycles for foreign accounts receivable; and to finance stand-by letters of credit.
Business owners can also finance activities that will expand their exports or improve their competitive position with respect to imports, such as renovating or improving facilities where they produce goods for international trade.
There are three types of export loans available through the SBA–
You can decide for yourself which is the best fit for your company’s needs:
If your small business is ready to apply for an Export Loan through the SBA, you contact an approved SBA lender, contact your local U.S. Export Assistance Center, or find an export lender near you, or submit a loan request here.
The Small Business Administration Microloan Program is ideal for the small business owner who can afford to put up collateral and offer a personal guarantee in exchange for loan proceeds of $50,000 or less to be used for working capital, inventory, supplies, furniture, fixtures, machinery, or equipment.
A unique feature of Microloans: Borrowers must be able to repay the loan in six years or less.
The easiest way to qualify for an SBA Microloan is to connect with a participating intermediary microlender serving your area.
These nonprofit, community-based organizations offer loans and even help with managing your business.
You may also need to fulfill business training or planning requirements as part of your loan terms.
The SBA facilitates billions of dollars’ worth of small business loans every year.
If your business qualifies, you could join the ranks of the many small businesses that have benefited from the Small Business Administration’s loan programs.
Who knows… maybe an SBA loan can help your small business grow beyond even what you thought was possible!