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The government-backed loan your business needs.
An SBA loan is a small business loan partially backed by the government. Contrary to what you might think, the SBA doesn’t actually foot any of the cash. Instead, it establishes the guidelines for loans and then guarantees a portion of those loans. Because lenders have much less risk in the case of a default, they’re more likely to provide funds to entrepreneurs like you.
With a proprietary application platform that makes uploading documents fast and easy and a dedicated SBA team on call to answer any questions you have and assist you throughout the funding process, we’ve made it as easy as possible for business owners to access an SBA loan.
SBA loan interest rates are some of the lowest in the business: they’re based on prime rate, which in turn is influenced by the Federal Funds Rate set by the Federal Reserve. Historically, the Federal Funds Rate is very low (it reached as high as 16.39% in 1981). If you want to save money in interest on a business loan, you will save the most with an SBA loan.
If your business doesn’t match some of the qualifiers below, it may be more challenging to receive funding from our lending partners.
Lendio’s mobile app can help get your business ready for financing. Open a business bank account, get cash flow insights and stay connected to get updated when you have offers available.
You can find an SBA loan option to cover just about every nook and cranny of your small business. Some of the most common SBA loans include the 7(a), 504, and SBA Microloan.
Use It For
Fixed assets such as land, a building or machinery
Max Loan Amount
Working capital, debt refinancing or to purchase business assets
5.75-8.25% variable rate
8.5-11.5% fixed rate
Working capital or to purchase inventory and equipment
Up to 6 years
To be eligible for a SBA loan, a small business must meet certain requirements defined by the SBA.
Read more about SBA Loan qualification
Sure, you can go the bank route with a long application process and 75% rejection rate. But if you’re looking for financing in this lifetime, Lendio offers a faster, easier application process.
It’s secured with bank-grade encryption and SSL technology, so you know your information is safe.
We pair you with loan options from our network of 75+ lenders. Our dedicated funding managers can help you weigh the pros and cons of each option.
Once you’re approved, you’ll be able to access your capital in one to two months.
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Sterling HannemannCo-Owner of Seven Brothers
Chloria ChandlerOwner of Bobbee O’s BBQ
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The first step to applying for an SBA loan is choosing what type of SBA loan you want. There are 6 types of SBA loans including CAPLines, a business line of credit. Each type has its own set of advantages you’ll want to consider—from higher loan amounts, lower interest rates, or longer maturities.
After you’ve submitted your loan application to your chosen lender, you may be contacted for further questioning by a loan underwriter. Make sure to answer any questions you receive as quickly as possible so your loan application can proceed.
Typically, a soft underwriting process occurs next, followed by a loan proposal—if the lender initially likes what it sees. A loan proposal outlines the loan’s terms and lists out any additional fees that accompany the loan. Once signed, a more stringent underwriting process begins.
If your application passes through this second round of underwriting, you’ll be sent a commitment letter by the lender. Once signed, you can expect to receive your money in a few months.
No, but they are backed by the US government. Private lenders are responsible for disbursing the entire loan amount to the borrower, and the US government only gets involved if the borrower defaults on the SBA loan. Depending on the loan amount, the SBA may insure up to 85% of the loan, which equates to less risk for lenders. This reduced risk means that lenders are able to offer lower interest rates.
When compared to other financial products available to small businesses, SBA loans can be considered the most difficult to get mainly because of the eligibility requirements and application length. With underwriting, most lenders can take up to 3 months to approve or deny an SBA loan. With Lendio’s special application process and dedicated SBA team, time to funds can be reduced to as fast as two weeks.
Any borrower looking for COVID EIDL loans should be aware that the SBA stopped taking loan applications for this loan due to lack of funding on January 1, 2022. However, borrowers may not have qualified for other reasons, too—such as having too many employees.
All other SBA loans, however, are still available.
SBA loans have specific eligibility requirements that businesses and business owners must meet. These include:
Yes, SBA loans must be paid back. When a borrower agrees to the loan agreement of an SBA loan, they are agreeing to pay back the loan principal with interest.
SBA grants, however, don’t have to be paid back.
No. If an SBA loan is cancelled, collateral used to secure the loan may be liquidated. After liquidation the loan is settled by the SBA and bank.
The 7(a) is one of the most flexible SBA loans. You can use it to:
There are two types of SBA 7(a) loans: SBA 7(a) Standard and SBA 7(a) Small Loan. They have similar rates and terms, but the Small Loan is capped at a maximum loan amount of $350,000.
For SBA 7(a) loans under $350,000, the SBA lender will require collateral of all business assets no matter how small. No personal collateral will be required. For loans over $350,000 or higher, personal collateral will almost always be required.
If you’re looking for a large amount of money, you can access a 7(a) loan for up to $5 million—if you meet all the qualification requirements.
SBA 504 loans can be a bit more complicated than 7(a)s. Because you must use a 504 to fund a specific fixed asset, a thorough examination of your project costs will come into play. When your loan is funded, the lender will initially cover 50% of your costs and the SBA will cover 40%—which means that you’re responsible for covering at least 10% right off the bat. You’ll also be required to personally guarantee at least 20% of the loan.
You must use an SBA 504 loan to finance fixed assets, although some soft costs can also be included. Examples of qualifying projects include:
There are some cool perks to the SBA 504 loan. For example, you’ll benefit from 90% financing, longer amortizations, no balloon payments, and fixed interest rates.
To qualify for an SBA 504 loan, your business must have a tangible net worth of less than $15 million and an average net income of $5 million or less for the two years before your application.
If you need cash in a jiffy, the SBA Express is the loan for you. Unlike the somewhat slower review processes you might encounter with other SBA loans, SBA Express applications are reviewed within 36 hours. This doesn’t mean that you’ll get access to funds that fast, though—it often takes at least 30 days to fund your SBA Express loan.
You can finance up to $500,000 with an SBA Express loan. If your loan amount is more than $25,000, your lender may require you to secure your loan with collateral. The loan can be used as working capital (5–10 year term), a line of credit (7-year term), or a commercial real estate loan (25-year term).
The short answer: it depends on what type of SBA loan you take out. The SBA 7(a), CAPLine, and 504 each have a maximum loan amount of $5 million. The next highest is the SBA Disaster Loan, which has a maximum borrowing amount of $2 million.
For the SBA Export Loan, borrowers may be able to borrow as much as $500,000, and for an SBA Microloan, the maximum is $50,000.
When deciding which type of SBA loan to pursue, borrowers should consider both the interest rate and the term length. Loans with longer term lengths typically have lower monthly payments, but this also means that you’ll pay more money in interest over time.
If you have the cash flow to support a higher monthly payment, you may want to consider a loan option with a shorter maturity in order to save money in interest, but the maximum maturity often depends on your plans for the money. If you need the loan to purchase commercial real estate, for example, a 20-year loan maturity may be in your best interest.
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