How to get approved for an SBA Loan
Karnchea Barchue • January 23, 2021
SBA Loan
An SBA loan is a type of financing provided by private lenders (such as banks and credit unions) and partially guaranteed by the U.S. Small Business Administration (SBA). This partnership helps reduce the risk for lenders, making it easier for small businesses to access funding with favorable terms.
Key Features:
- Low Interest Rates: Typically lower than traditional loans due to the SBA guarantee.
- Long Repayment Terms: Ranges from 7 to 25 years, depending on the loan purpose.
- Flexible Use: Funds can be used for working capital, equipment purchases, real estate, debt refinancing, or business expansion.
- Government-Backed: Reduces lender risk and increases approval chances for borrowers.
Popular SBA Loan Programs:
- 7(a) Loan Program:
- Most versatile.
- Maximum loan amount: $5 million.
- Ideal for working capital, equipment, real estate, or refinancing.
- 504 Loan Program:
- Focused on real estate and large equipment purchases.
- Maximum loan amount: $5.5 million.
- Microloan Program:
- Designed for startups and small businesses.
- Loan amounts up to $50,000.
- Often used for working capital or purchasing supplies.
- Disaster Loans:
- Assists businesses affected by natural disasters or economic hardships.
Basic Qualifications:
- Business Size: Must meet the SBA’s definition of a small business.
- Good Credit History: Strong personal and business credit scores.
- Time in Business: Typically 2+ years (startups may require additional documentation).
- Business Plan: Demonstrates the ability to repay the loan.
Pros:
- Favorable terms and rates.
- Accessible to businesses with limited collateral or credit history.
- Support for long-term growth.
Cons:
- Lengthy application process.
- Requires thorough documentation.
- SBA guarantee fees may apply.
Would you like assistance with applying for an SBA loan or understanding the documentation requirements?
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*** All files are subject to full underwriting & qualifications specified by each bank. There can be no assurance that any applicant will be approved and that credit will be offered.***