You must fully understand all of your funding options as a new small business owner. Small business owners frequently look for their first loans from banks, friends, family, and other outside investors. However, if none of these work, you might want to consider SBA loans.
The SBA offers a wide range of loan programs, including ones for small companies that have been impacted by international events like COVID-19 or natural disasters.
Types, Pros and Cons, How to Apply
The products listed here, many or all of them, are from our partners, who pay us. This could affect the products we write about as well as where and how they show up on a page. However, this does not influence our evaluations. Our opinions are our own. This is our revenue model and a list of our partners.
⏰ Estimated read time: 10 minutes
How much do you need?
We’ll begin by asking you a quick questionnaire to better understand the particular requirements of your company.
When we find your unique matches, our staff will talk with you about the next steps in the process.
What is an SBA loan?
| Program | Loan size | Purpose |
|---|---|---|
| SBA microloans | Up to $50,000. | Working capital, inventory, supplies, equipment and machinery. |
| SBA disaster loans | Up to $2 million. | Repair physical damage due to a declared disaster and cover operating expenses. |
| SBA Export Working Capital loans | Up to $5 million. | Working capital to support export sales. |
| SBA Export Express loans | Up to $500,000. | Expedited funding to enhance a business’s export development. |
| SBA International Trade loans | Up to $5 million. | Long-term funding to expand export sales or modernize to contend with foreign competitors. |
Pros of SBA loans
- Working capital or inventory loan: 10 years.
- Equipment: 10 years.
- Real estate: 25 years.
Cons of SBA loans
- You must be a for-profit business operating in the U.S.
- The company’s owner needs to have contributed equity, including their own funds and time, to the enterprise.
- You must be able to prove that you need funding and outline the intended use of the money for your company.
- You must be able to show your creditworthiness — i. e. your business has the means to repay the loan.
- You have to be an SBA-defined small business.
- It is necessary that prior to applying for an SBA loan, you attempted to obtain funding from non-government sources.
How to get an SBA loan
- How many SBA loans do you make?
- How often do you fund SBA loans?
- How experienced is your staff in the process?
- What is the dollar range of the loans you make?
Gather your documents
- SBA’s borrower information form.
- Statement of personal history.
- Personal financial statement.
- Business financial statements.
- Personal income tax returns.
- Business tax returns.
- Business license.
- Loan application history.
- Business owner resumes.
- Lease agreement if applicable.
- One-year cash flow projection.
Submit your application and wait
Browse our top picks overall or filter by category to discover the ideal choices for you.
- Our top overall picks
- Best for bad credit
- Best for startups
- Best for LLCs
- Best for lines of credit
Dive even deeper in Small Business
Register for free to explore small business products and gain customized insights to help you grow your company.
Register for free to explore small business products and gain customized insights to help you grow your company.
FAQ
Is getting an SBA loan difficult?
Generally speaking, obtaining SBA loans is easier than obtaining business bank loans. Because they’re backed by the U. S. government, banks find them less hazardous than making their own loan issuance.
What are the chances of getting approved for an SBA loan?
Numerous data points to large banks approving SBA loans at low rates as 2020–30%, while smaller banks approving SBA loans at rates of around 2040% or less. To sum up, the approval rates for SBA loans are typically half or lower than those of other loan applications.
What will disqualify you from SBA loan?
If your company has wealthier assets than the requested loan amount or could get financing elsewhere, you might not be approved for an SBA loan. Additionally, it’s likely that you won’t be approved if you’ve previously defaulted on a government loan. Finally, the SBA disqualifies specific industries, including: Financial institutions.
What credit score is needed for SBA loan?
The minimum credit score required for an SBA loan is 20680%, and the down payment to purchase the asset is 10% of the total. The SBA 504 loan, also known as the SBA CDC loan, provides major fixed assets (i.e., up to $5 million) with long-term, fixed-rate funding. e. , real estate, equipment, etc. ) that promote business growth and job creation.
Read More :
https://www.nerdwallet.com/article/small-business/small-business-loans-sba-loans
https://www.businessnewsdaily.com/15763-sba-loan-guide.html