All businesses have different needs but you can find an SBA loan option to help cover any financial needs your business might need. Seriously. You can find an SBA loan option to coveSome of the most common SBA loans are the 7(a), 504, and SBA Express.
SBA 7(a) Loan
The 7(a) is one of the most flexible SBA loans. You can use it to:
- Purchase land
- Help cover any construction costs
- Purchase or expand an existing business
- Refinance any current debt
- Purchase machinery, furniture, supplies, or materials
SBA 7(a) loans that are less than $25,000 may not require collateral but higher loan amounts likely will. Any loans of $350,000 and above, requires your lender to ask for the maximum possible amount of collateral to limit their risk. Most forms of personal collateral will also help you quality if your business does not cover the loan amount. A 7(a) can go as high as $5 million if you meet all the qualification requirements for businesses looking for an extremely large amount of funds.
SBA 504 Loan
504 loans are used to fund a project so they differ from 7 (a) loans a bit. A thorough examination of your project costs will play a major role when applying for this kind of loan. From the get, you are at minimum responsible for covering at least 10% of the loan up front. When your loan is funded, the lender will initially cover 50% of your costs and the SBA will cover 40% . A 20% personal guarantee of the loan is also a requirement.
You must use your SBA 504 loan to finance fixed assets, however some soft costs can also be included. Examples of qualifying projects are:
- Purchase an existing building
- Purchase a new facility or renovate an existing facility
- Purchase land or make improvements such as grading, landscaping, and adding parking lots
- Purchase machinery that will be used for long-term purposes
- Refinance debt built up through an expansion of your business or renovation of your facilities or equipment
A tangible net worth of more than $15 million and an average net income of $5 million or less for the two years prior to your application are both required. Some great initiatives for this loan include, benefiting from 90% financing, longer amortizations, no balloon payments, and fixed interest rates.
SBA Express Loan
If you are in need of cash sooner than later, the SBA Express is a great option for you. Other SBA loan processes usually take time, but the SBA Express applications are reviewed within 36 hours. You wont get your money that quickly because it usually still takes at least 30 days to get your SBA Express loan funded but the overall process is the quickest!
With SBA express, you can finance up to $350,000. If your loan amount is more than $25,000, your lender may require you to secure your loan with collateral, which is normal. The loan can be used as working capital (5-10 year term) or a line of credit (7-year term), or as a commercial real estate loan (25-year term).
Most people think that because SBA loans are backed by the government and that they are directly funding your small business loan. However, that is not generally not the case for traditional SBA loans, the adjustments made to EIDLs by the CARES Act and the creation of PPPs mean the funds for these loans come straight from the US Treasury. In the case of the 7(a), 504, and Express loans, the SBA guarantees the loans, limiting the risk for the lender and making SBA loans more appealing to lenders.
SBA loans tend to offer enviable rates and terms for small businesses that do not qualify for normal loans by the bank. The benefits to these government-backed loans offer monthly payments, fixed interest rates, special-case principal amount forgiveness, and long repayment terms.
SBA loans can help build and improve your credit, which will set you up for success in the future if you ever need funding again. Your credit score will determine the loan amount and different forms of financing someone can offer you, so it’s important to have the best score possible.
SBA loans are easier to attain than your normal bank loan. They’re known for being more paperwork-intensive with a much longer time to funds and a higher percentage of rejection than direct online lenders. Due to our current economic state and COVID-19, some of the SBA loans have loosened their requirements to try and help as many small business owners as possible right now.
You’ll need to provide enough information to assess your loan application for a pre-approval letter. Beyond the standard items needed to acquire a loan, here are some things can help speed up the approval process
- Business Application
- Last 6 Months of Business Bank Statements
- Business Debt Schedule
- 2 Years Business Tax Returns
- 2 Years Personal Tax Returns
- Interim YTD Financials (Profit & Loss Statement & Balance Sheet)
Paperwork while filing for an SBA loan should not stress you out! Our highly trained and qualified staff can help walk you through the whole process to help answer your questions and make the application process as smooth as possible.
SBA loan interest rates are some of the lowest that you can get. Because SBA loan interest rates are based on the prime rate, SBA interest rates change whenever the Federal Reserve moves the needle.