How to apply for SBA loan
Once you've considered all the SBA lending guidelines and feel that your business is ready to apply for a government-guaranteed loan, it's time to begin the application process. Firstly, you'll need to choose the SBA program that's right for your business needs, a topic we'll cover in the next section. SBA 7(a) is the most common choice by far among those who apply for SBA loan online, however. The next step involves choosing a lender from companies like Lending Tree, Excel Management Capital, and smartbiz, among others.
It's at this point that you'll need to consider just how much you'd like to borrow, the interest rate you'd like to pay, and whether or not you actually qualify. You may also want to choose from a list of Preferred SBA Lenders, though these can have longer application turnaround periods than non-government favored lenders, simply because they tend to be more traditional institutions like banks. Some SBA services require down payments and collateral too. Have you included that possibility in your plan to apply for SBA loan?
SBA loan types
The different types of SBA loans are designed to cater to most business concerns and eventualities. These include the standard types of small business loans, which simply provide extra capital, to disaster relief funds and those that help companies with an interest in exporting goods or services outside of the mainland USA. Here is a list of the most popular types of SBA loans:
7(a) Loan Program
Let's start by answering the question, "what is a sba 7a loan"? This product is a catch-all, multi-purpose option for small businesses, and includes six different loan categories. A basic 7a loan has a maximum borrowing limit of $5 million and is guaranteed to 85% of the loan. The 7a loan program pays out in 5-10 days.
SBA 504 Loan Program
One of the most common queries that we receive at this site is "what is an SBA 504 loan?", perhaps because it's a little more complicated than the 7(a) scheme. Otherwise known as a Certified Development Company (CDC) program, an SBA 504 loan is a sum of money granted to buy assets like real estate and machines. The SBA 504 loan program requires a 10-20% down payment and can be used to source up to $5.5m in capital. SBA 504 loans go through a CDC, not a lender.
SBA Microloans
An SBA microloan is worth up to $50,000 (the average loan amount is $13,000) and can be used to buy machinery and inventory but not real estate. Very limited access is given to non-profit applications, like childcare companies. The government and its lenders will provide SBA microloans for felons too, which is not the case for other loan types in the SBA program. Felons, however, must demonstrate that they are serious about starting or expanding a business to qualify.
SBA CAPLines
The SBA CAPLines program is part of the 7(a) scheme but works more like a credit card - it's a line of credit. A maximum of a $5m credit limit is allocated to successful applicants by SBA CAPLine lenders, and users simply pay back what they spend, plus interest. An SBA CAPLine loan renews with payments unless it's considered fixed by prior agreement.
SBA Express Loans
An SBA Express loan is virtually the same as the options available under the 7(a) scheme. However, the SBA Express loan program can provide funds in 36 hours, rather than the 5-10 days standard in other types of loans. SBA Express loans require strong credit scores, however.
SBA Disaster Loans
An SBA disaster loan payment does exactly what you might expect - it helps businesses pay for damages caused by declared disasters like floods and fires. SBA disaster assistance can finance lost or damaged real-estate, inventory, machinery, and other business-critical assets. Due to the blameless nature of many disasters, natural, in particular, SBA loans for disaster relief have low interest rates and business owners can apply for up to $2m. Note that a declared disaster zone is an official term for insurance purposes, and people living outside these areas will not be eligible for the SBA disaster loan process.
SBA Loans for Veterans
Military veterans in the United States are eligible for SBA loans with a few additional perks. For instance, SBA loans for veterans of more than $150,000 have no upfront fees. This waived guaranty fee is called the SBA Veterans Advantage. Many ex-military applicants prefer to use the SBA Express loan for veterans service, and 73% of all veteran loans take a figure of around the maximum $350,000.
Benefits of SBA-guaranteed Loans
The benefits of SBA loan programs are the reason they remain so popular among small business owners and entrepreneurs.
Competitive terms
The government-backed scheme has some of the lowest interest rates of all business loan providers (as low as 6.75%).
Counseling and education
The SBA can help a business get started or counsel staff on how best to spend their loan money to gain a foothold in their respective industries.
Unique benefits
SBA loan benefits like Veterans Advantage and their accessibility to felons help them stand out as unique among other financial products.
Top 3 SBA Loans
SmartBiz
As the leading online bank network, SmartBiz has over a decade of experience catering to the financial needs of small businesses with SBA loans. SmartBiz makes it quick and easy to access the financing that your small business needs to grow, making the provider a perfect choice for established small businesses in need of debt refinancing or expanding with low-cost financing.
The amount you can borrow ranges from $30,000 to $350,000 and you’ll find it difficult to beat the rates that are on offer: 9.28% to 10.52% for regular term loans and 7.12% to 7.18% for commercial real estate loans. To access that money, you’ll need to complete a quick application form, which is a much quicker process than trying to access finance from banks. If you’re not sure your business has the right credentials to apply for a loan, you can even use SmartBizAdvisor, its free online tool, to calculate the probability of you receiving a loan.
Fundera
Fundera provides a variety of loans for small businesses and works by matching borrowers with the most ideal lenders. The company exists to make the process of applying for SBA loans as simple as possible. Its experts have a huge amount of SBA knowledge and are able to guide you through the different SBA programs out there, so you find the best possible finance solution for your business.
Which SBA loan program you’ll be able to apply for depends on the size, age and goals of your business. All of these programs have varying loan amounts from $5000–$500,000, loan terms ranging from 5–25 years and interest rates from as low as 6%. The experts at Fundera have built a solid reputation for providing the best possible advice to small businesses and are able to talk you through any difficulties you may have previously experienced when applying for loans. Together, you’ll be sure to overcome any hurdles so you can get the money your business needs to grow.
Kabbage
Kabbage has a dedicated branch of the business, Kabbage Funding, to cater to the financial needs of small businesses with a variety of SBA loans. Your business could be eligible to receive up to $250,000 with a line of credit. Operating on transparent terms, Kabbage is trusted by thousands of people worldwide and has an A+ rating from the Better Business Bureau. What’s more, its loans don’t come with any hidden fees.
In order to apply for an SBA loan, you’ll have to supply extensive documentation. Thankfully, Kabbage’s team of experts is able to talk you through how to collate this information. Usually, it’ll include background information like financial history, profit and loss statements, income and tax returns, and an overview of the business. SBA backing significantly increases the likelihood that your business will receive funding from traditional lenders, so consider Kabbage.
SBA Loans for Bad Credit
A negative credit file is not necessarily fatal for an SBA loan application. SBA micro loan bad credit options are available if certain criteria are fulfilled. For instance, a company that has at least two years' market experience and has staff that has either undergone additional training or is willing to commit to extra education may be sufficiently attractive lenders. The keyword is 'remedial' - a business has to apply for an SBA loan both to fund their business and to repair their credit file. If lenders believe that this is not the case, additional capital will be hard to come by.
My Conclusion
For businesses that meet the SBA's strict requirements for application, SBA loans are an outstanding option for fledgling businesses or those companies that need to find extra cash to expand or buy new premises, for instance. As Small Business Administration loans are partially guaranteed by the government, a lot of the financial pressure that would be placed on both lender and borrower is alleviated. However, keeping up with an SBA loan payment plan is key to finding future loan options, especially in the case of credit products, which can be frozen.
We hope that our guide to SBA loans has helped you understand the options available to you and your business, even if you ultimately choose a path that doesn't involve any SBA lending.
