Every business needs money. Whether you are just starting off or looking to grow an existing business, money is the lifeline that will help you get there. Thankfully, getting the financial help your business needs is easy thanks to the U.S. Small Business Administration (SBA).
Thousands of banks and lending institutions across the country participate in SBA programs. These financial providers are committed to helping your business grow and expand. If you are looking to give your business a financial advantage moving forward, read along as we explore the ins and outs of an SBA loan.
The SBA 7(a) Loan Program
The 7(a) loan is the most commonly requested SBA loan program. Rather than the SBA directly lending money to small businesses, the Administration sets the guidelines that authorized SBA lenders follow in exchange for guaranteed repayment of a large portion of the loan.
This repayment guarantee lowers the risk for authorized lenders, letting them loosen their lending standards and allowing small business owners with less established credit history or cash flow to secure a loan. While the SBA itself does not determine borrower eligibility, it does issue the following guidelines your business must meet:
- Operate as a for-profit entity
- Meet the SBA’s definition as a small business
- Be engaged in, or propose to do business in the United States
- Have reasonable invested equity
- Use alternative financial resources before seeking assistance
- Be able to demonstrate a need for the loan proceeds
- Use the funds for a sound business purpose
- Not be delinquent on any debt obligations to the United States government
Is a Loan Right for You?
The SBA operates four primary loan types, meaning there is something for almost every business out there as long as they meet the necessary qualifications.
• The 7(a) General Small Business Long
This is the most common and appropriate loan for many types of businesses. They can be used for a broad range of purposes from refinancing to purchasing equipment and real estate. Under the 7(a) loan program, you can borrow up to $5 million. Maximum loan maturities are 25 years for real estate, 10 years for equipment and seven years for working capital.
• The 7(a) Express Loan
The 7(a) Express Loan is similar to the standard 7(a) loan in many ways. The main difference between the two is that, as the name suggests, an Express loan has an expedited application process. In most circumstances, businesses can expect a response within 36 hours of submitting their application. However, the tradeoff for this quick response is a lower maximum amount of $350,000.
• CDC/504 Real Estate and Equipment Loan
This specialty loan is designed specifically for large capital investments in land, equipment and machinery. To be eligible for a Certified Development Company (CDC)/504 loan, applicants must meet a number of eligibility requirements put in place by the SBA.
• The SBA Business Physical Disaster Loan
If your business has been damaged by a disaster that is in a declared disaster area, you may be eligible for a Business Physical Disaster Loan. These low-interest loans can be used to repair or replace items damaged or destroyed in the wake of a declared disaster.
Applying for Your Small Business Loan
If your company meets the qualifications, the first step to applying is to find an authorized lender in your area. Once you find your approved lender of choice, it is time to piece together all the necessary paperwork and fill out your SBA loan application. Each SBA loan program has its own eligibility criteria and application process, so make sure to check online to see what your loan needs. Get a head start on your application process by tracking down the following items:
• Personal background and financial statement
• Any business financial statements, both past and projected
• Ownership & Affiliation information
• Any business certifications of licenses
• Your history of previous loan applications
• A brief overview and history of your business
When you have all your paperwork in order, it is time to meet with a lender to submit your proposal. During your initial meeting, a lender will gather information to determine if your business goals align with their requirements and parameters. Lenders take several factors into consideration when reviewing initial loan requests, including equity investment, collateral, earning requirements, working capital and resource management. If a lender approves your initial information, the lending process continues with a formal proposal from the lender and completion of necessary paperwork.
At CHROME, we believe that small businesses are the backbone of our community. That is why we do everything we can to help your business get off the ground with our easy to use small business financial services and products. Whether you need a little extra money to grow, or just are not feeling the love from your current financial provider, our small business team puts their best foot forward for all of your banking needs. Schedule an appointment with one of our small business financing representatives today, and let us work together to build a better community.