What is an SBA Loan?
The U.S. Small Business Administration, or SBA, is a federal agency that provides loan guarantee programs and other services to support and encourage the growth and development of small businesses across the United States. It was founded on July 30, 1953, and has delivered over 20 million loans, guarantees, counseling sessions, contracts, and other forms of assistance to small businesses across the country. SBA loans are offered to merchants through multiple financial institutions.
SBA Loan Guarantee Program
The SBA guarantees a portion of the loan, which makes it easier for funders to provide loans to small businesses that may fall in a higher risk category. These businesses may not be in a strong enough financial position to obtain traditional bank small business loans, and therefore rely on the SBA guarantee.
Common SBA Loan Program Features
SBA programs offer lower down payments and longer term financing, which can help businesses just starting out, those looking to expand, or better manage their cash flow. This allows small businesses to focus on operational expenses rather than debt repayment.
What Can I Use an SBA Loan For?
Loans from the SBA are provided for various purposes. These include business start-ups or acquisitions, working capital, owner-occupied real estate, franchise financing, inventory, debt refinancing, equipment, and even improvements and renovations.
Choosing an SBA Funder
Biz2Credit can help merchants find the right SBA funder for their needs, and we have the experience needed to make SBA borrowing easier and more convenient for our customers.
Which SBA Financing Solution is right for your business?
SBA Loan Benefits
- Good source of long term financing for working capital needs.
- Excellent source for flexible use of proceeds. No balloons or calls and provides highly leveraged financing.
- An excellent long term fixed rate product.
SBA Express Loans
SBA Loan Benefits
Good source of long term financing for working capital needs.
Eligibility
Merchant(s), Business and Use of Proceeds all need to be eligible. Age of business needs to be greater than 18 months. Owners should either be US citizens or Green card holders.
Loan Amounts
Up to $350,000. Loans up to 100,000 do not require any proof of income. Loans above $100,000 require last 2 yrs of business and personal tax returns on all principals having more than 20% stake.
Up to $5,000,000. Loans require last 3 yrs of business tax returns, real estate schedule if applicable and 2 yrs of personal tax returns on all principals having more than 20 % stake.
2nd Mortgage = *
*$1,500,000 – Standard
$2,000,000 – Public policy goal
$4,000,000 – Manufacturing
Who Is Eligible for an SBA 7(a) Loan?
Eligibility requirements for the 7(a) loan program are based on several key characteristics of the business and its owners. According to the SBA, eligibility is based on how the company earns its revenue, the background of its owners and where it operates.
SBA does not specifically list companies eligible to receive 7(a) loans. However, they do provide a list of industries that are ineligible for these types of loans. See SBA ineligible companies). However, there are some basic requirements to be eligible for assistance. Businesses must:
- Operate for profit
- Be small, as defined by the SBA
- Be engaged in, or propose to do business in, the United States or its possessions
- Have reasonable invested equity
- Use alternative financial resources, including personal assets, before seeking financial assistance
- Be able to demonstrate a need for the loan proceeds
- Use the funds for a sound business purpose
- Not be delinquent on any existing debt obligations to the U.S. government
How Can I Use Money From An SBA 7(a) Loan?
According to the Small Business Administration, there are some rules on how you can and cannot use proceeds from an SBA-guaranteed 7(a) loan. Typically, the use of loan proceeds is very general according to SBA loan rules. However, there are some limitations and restrictions on the use of funds. “For example, proceeds can’t be used to buy an asset to hold for its potential increased value or to reimburse an owner for the money they previously put into their business.”
Acceptable uses of SBA 7(a) Loan Proceeds
Financing for long and short term assets used in normal business operations. Acquisitions and refinances are eligible, and may include real estate and business goodwill. Working lines of credit up to $100,000 are also eligible.
- To purchase equipment, machinery, furniture, fixtures, supplies or materials
- To purchase real estate, including land and buildings
- To construct a new building or renovate an existing building
- To establish a new business or assist in the acquisition, operation or expansion of an existing business
- To refinance existing business debt, under certain conditions
