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SBA Loan

The small business loan that makes a big impact.

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Loan Amount Icon

Loan Amount

$50,000-5,000,000
Loan Term Icon

Loan Term

10-25 Years
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Time to Funds

30-90 Days
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Interest Rate

Prime+
SBA Loan

The SBA is your small business ally.

Finally, a government program that we can all agree is cool. The U.S. Small Business Administration (SBA) is a federal agency built solely for the purpose of helping small businesses get the funding they need. 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.

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Whatever your business needs, there's an SBA loan for that.

Seriously. 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 are the 7(a), 504, and SBA Express. We'll break 'em down here so you can get an idea of which one might be best for your small business.

SBA 7(a) Loan

The 7(a) is one of the most flexible SBA loans. You can use it to:

  • Buy land
  • Cover construction costs
  • Buy or expand an existing business
  • Refinance your existing debt
  • Buy machinery, furniture, supplies, or materials

SBA 7(a) loans of less than $25,000 may not require collateral but higher loan amounts likely will. For loans of $350,000 or higher, the SBA requires your lender to ask for the maximum possible amount of collateral to limit risk of default. If you don't have enough business collateral to cover it, that's okay - many forms of personal collateral will also help you qualify.

If you're looking for a lot of cash, you can get a 7(a) loan for up to $5 million if you meet all the qualification requirements.

SBA 504 Loan

504 loans can be a bit more complicated than 7(a)s. Because you would use a 504 to fund a project, 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% - that means 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 your SBA 504 loan to finance fixed assets, although some soft costs can also be included. Examples of qualifying projects are:

  • Buy an existing building
  • Build a new facility or renovate an existing facility
  • Buy land or make land improvements such as grading, landscaping, and adding parking lots
  • Buy long-term machinery
  • Refinance debt incurred through the expansion of your business or renovation of your facilities or equipment

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 more than $15 million and an average net income of $5 million or less for the two years prior to your application.

SBA Express Loan

If you need cash in a jiffy, the SBA Express is the loan for you. Unlike the somewhat slower review process 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 still takes at least 30 days to get your SBA Express loan funded.

You can finance up to $350,000 with an SBA Express. 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) or a line of credit (7-year term), or as a commercial real estate loan (25-year term).

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Less risk for the bank often means a better deal for you.

SBA loans are a hot commodity, with rates and terms comparable to bank loans even for entrepreneurs who typically aren't viewed as ideal candidates by traditional lenders. Because the SBA guarantees the loans and limits risk for the lender, many banks find SBA loans more desirable. In fact, the banks will actually fight to be your lender. This means you often get hooked up with better rates and terms - awesome, huh?

And the benefits of SBA loans don't stop there - you should also know that they offer monthly payments, fixed interest rates, and long repayment terms. SBA loans are also an excellent way to build and improve your credit, which puts you in a better position to apply for other kinds of loans or higher amounts when you need your next round of small business funding.

There are also plenty of long-term benefits for small businesses who get SBA loans. For example, the SBA estimates that 504 loans have created more than 2 million jobs since 2012. So yeah, you probably have the right idea if you're looking at SBA loans - they're proven to help small businesses like yours grow.

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You'll need to provide some paperwork to get your SBA loan.

While SBA loans are significantly easier to attain than a traditional bank loan, they’re still more difficult to acquire than most loans from non-institutional lenders. They’re known for being more paperwork intensive, with a much longer time to funds and a higher percentage of rejection than direct online lenders.

This means that you’ll need to provide enough information to assess your loan application for a pre-approval letter. In addition to providing the standard stuff like your business license, rounding up these documents can speed up the process and make it easier for you to get approved:

  • 2 years of business tax returns
  • 2 years of personal tax returns
  • YTD Profit and Loss statement
  • YTD balance sheet
  • Debt schedule

Don't worry, more paperwork doesn't necessarily equal more hassle. Our proprietary application platform lets you upload copies of all your documents with just a click, which means you don't need to tote around a mountain of paperwork to get approved. And our personal funding managers can walk you through the whole process if you need a little extra help.

Quotes

Michael made the SBA loan process as efficient, quick, and manageable as possible. He always made himself available for the most important or simple questions, and fought for me when someone had to fight on my behalf. The process itself will always be a large endeavor, but Michael and the team at Lendio do the best job of making it a smooth process.

Dimitri Blackstone-Karapanos

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