SBA LOANS

An SBA LOAN is a business loan guaranteed by the U.S. Small Business Administration. Contrary to popular belief, the SBA does not actually lend directly. Rather, the SBA establishes guidelines for participating lenders and guarantees a portion of the loan, up to 85%, which lessens the risk for the lender, and increases the likelihood of approval.

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The SBA 7(a) Loan

  • Up to $5m
  • In as fast as 45 days
  • Fixed interest rate as low as prime + 2.25%
  • Terms from 10 years to 25 years
  • Fees of 1.7%-2.25%
  • Monthly payments

Uses

  • Refinance debt
  • Buy land
  • Finance construction expenses
  • Purchase equipment, furniture, materials, or supplies
  • Expand or acquire an existing business

WHAT YOU NEED TO KNOW?

The SBA 7(a) Loan stands out due to its flexibility and broad range of permissible uses. For loans exceeding $25,000, collateral is often necessary, with loans surpassing $350,000 typically demanding maximum collateral (personal assets can supplement business collateral). While the standard 7(a) loan, extending to $5 million, has strict credit criteria and a potential 60-day funding period, the 7(a) small loan, up to $350,000, can be expedited by the lender with more relaxed terms if the application clears the SBA pre-screen process. Unsuccessful pre-screening moves the application to the standard 7(a) underwriting process.

The SBA Express Loan

  • Up to $350,000
  • In as fast as 30 days
  • Fixed interest rate as low as prime + 4.5%
  • Terms from 7 years to 25 years
  • Fees vary based on lender
  • Monthly payments

Uses

  • Working capital (5 to 10-year term)
  • Line of credit (7-year term)
  • Commercial real estate (25-year term)

WHAT YOU NEED TO KNOW?

If you're in need of swift funds, the SBA Express Loan might be an ideal choice. It shares many similarities with the standard SBA 7(a) loan in terms of how funds can be used and the requirements for funding. However, the primary difference lies in the interest rates, which are typically less favorable for SBA Express loans compared to 7(a) loans. Nevertheless, the trade-off is remarkable: SBA Express loan applications usually receive credit decisions within just 36 hours, and funding often occurs after a mere 30 days. This accelerated funding process sets it apart from the comparatively slower 7(a) loans.

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The SBA CDC/504 Loan

  • Up to $5m
  • In as fast as 60 days
  • Fixed interest rate as low as 5%
  • Terms from 10 years to 25 years
  • Fees of 3% of the loan amount
  • Monthly payments

Uses

  • Purchase long-term equipment
  • Refinance debt from facility renovation, equipment refurbishing, and/or business expansion
  • Acquire an existing building
  • Buy land or finance land developments like landscaping, creating new parking lots, and grading
  • New facility construction or existing facility renovation

WHAT YOU NEED TO KNOW?

The SBA CDC/504 Loan is designed for acquiring or enhancing fixed assets, with some allowance for certain soft costs. It offers benefits like substantial financing (90%), extended amortization periods (10 to 20 years), low fixed interest rates (around 5%-6%), and the absence of balloon payments. This program operates by the SBA bank covering 50% of the funding, an SBA-approved certified development company contributing 40%, and the borrower providing a 10% down payment. The borrower must also commit to a 20% personal guarantee and meet specific criteria: a business tangible net worth exceeding $15 million and an average net income below $5 million over the preceding 2 years. Although project costs are key for approval, this program's dual-lender structure—SBA bank and CDC—means the funding process tends to be lengthier compared to SBA 7(a) and Express programs.