An SBA (Small Business Administration) Loan is a type of loan that is backed by the government and intended to assist in starting or expanding a business. To be eligible for an SBA Loan, certain requirements must be met, including meeting size standards, demonstrating the ability to repay the loan, and having a clear and sound business purpose.
The SBA collaborates with approved lenders to offer their loan programs. These partnerships help mitigate the risk for lenders since the loans are guaranteed by the government. This guarantee provides lenders with added confidence in extending financial support to small businesses, as it reduces the potential loss in case of default.
Overall, SBA Loans are designed to provide accessible financing options to small businesses, encouraging their growth and contributing to the overall development of the business sector.
In order to apply for an SBA loan, you should follow these steps:
- Check your eligibility
- Choose the right program for your business
- Research trusted SBA lenders
- Prepare your documentation
If you are unsure if your business will qualify for an SBA loan, it’s best to reach out to a trusted lending partner to discuss your options and potential eligibility.
The SBA’s requirements include:
- Good to excellent personal credit
- For-profit business
- No previous delinquencies on government loans
- Must be in business for at least 3 years
- Must be considered a ‘Small Business’ from the SBA
SBA 7(a) may be available if your business does not meet the minimum time in business or credit score requirements.
What is a SBA 7(a) Loan?
A SBA 7(a) loan is the primary product from the SBA. It isn’t a loan directly from the SBA, rather, the SBA helps small business owners secure loans by guaranteeing a portion of the amount borrowed, capping interest rates, and limiting fees. Generally qualified business owners can use a 7(a) for any business purpose.
What is a SBA 504 Loan?
SBA 504 loans are generally used for buying fixed assets like equipment or real estate, which ultimately acts as collateral for the loan itself. This program may require a down payment and are made available through Certified Development Companies (CDC’s) not lenders.