SBA Loans for Small Businesses

SBA Loans 101

What are SBA Loans?

An SBA business loan is a flexible financing solution for your business.

It is financing supported by the U.S. Small Business Administration, which allows lenders to provide loans to borrowers with more favorable terms and more flexible underwriting criteria than conventional loans.

Because the U.S. Government backs these loans, they can offer your small business greater accessibility, lower down payments, and longer repayment terms than other financing options.

How do SBA Loans Work?

SBA Loans work by providing small businesses with loans guaranteed by the U.S. Small Business Administration. Your SBA loan is facilitated through partnering lenders, such as banks, credit unions, or other financial institutions.

Once a business owner is approved for an SBA loan, funds will be distributed, and the borrower will repay the loan according to the terms set in the agreement.

What sets SBA Loans apart from other financing options is that they require less risk for the lender. In the event that a borrower defaults on their loan payments, the SBA Guarantee steps in to cover a portion of the outstanding balance. This assurance encourages lenders to provide borrowers with more attractive terms and lower interest rates, as well as potentially provide financing to businesses that might not otherwise qualify for conventional loans.

Minimum Requirements to Qualify for SBA Loans

What are SBA Loans?

Qualifying for an SBA loan is based on various factors, depending on the type of loan you are trying to secure along with a fair amount of business-specific information based on your industry. Here are the minimum requirements:

You must own a US-based, for-profit business.
You must have less than 500 employees.
Your business must fall within an SBA-approved industry.
Your personal credit score must be at least 680.
You must have established business credit.
You can not exceed $7.5 Million average revenue each year for the past 3 years.
You must have fully exhausted all non-SBA financing options.
You must show invested equity.

Understanding SBA Loan Requirements

SBA loans are a great option for small businesses. They are backed by the federal government through the Small Business Administration which makes them more affordable than other business financing options. However, they are much more difficult to acquire with strict requirements and an abundance of paperwork. Here are the initial factors you must consider before applying for an SBA loan.

If you meet these minimum requirements, you will then need to meet a plethora of additional financing and industry-based requirements that will be based on the size of the loan along with the intended use of the loan.