SmartBiz Loans helps thousands of business owners acquire a low-cost SBA loan. In this short video, real small businesses discuss how SmartBiz makes SBA loans easy:
What is definitely an SBA loan?
Created in 1953, the U.S. Sba (SBA) helps entrepreneurs pursue the American dream. SBA may be the only cabinet-level federal agency fully focused on small company and provides counseling, capital, and contracting expertise as the nation's only go-to resource and voice for small businesses.
This bipartisan organization is a valuable resource for aspiring or current business owners. Here's some stats showing why entrepreneurs need this government entity in their corner:
- Small companies are a vital element of the overall economy accounting for 99.7% of all businesses in the U.S.
- Businesses in the usa with less than 100 employees account for 98.2%, and people with fewer than 20 employees take into account 89%.
- In July 2022 private sector jobs increased by 330,000 with smaller businesses contributing 91,000 new jobs to that particular total.
- In small businesses with fewer than 50 employees, jobs grew by 54,000 in companies with 20-49 employees and by 37,000 in companies with 1-19 employees.
In 2022, Isabella Casillas Guzman was named the administrator of the SBA in the Biden administration. In an SBA pr release, Guzman says:
\”Growing in an entrepreneurial family, I learned firsthand the way it operates of managing a business from my dad and gained an affection for that challenges small business owners face every day. Throughout my private and public sector career, I've been dedicated to helping small businesses grow and succeed. Now more than ever before, our impacted smaller businesses need our support, and also the SBA stands prepared to enable them to reopen and thrive.\”
Helping business owners secure funding is a vital aim of the SBA. The agency works together with lenders to supply loans to smaller businesses. The agency doesn't lend money straight to small businesses. Instead, it sets guidelines for loans produced by its partnering lenders, community development organizations, and micro-lending institutions. SBA reduces risk for lenders and makes it easier to allow them to access capital, making it simpler for smaller businesses to get loans. Since 2009, the SBA has backed over $150 billion through its various programs, listed below.
Types of SBA loans
- The 7(a) loan program
This is the SBA's most popular loan program because of low rates, long terms, and very low monthly obligations. Established small businesses with healthy credit ratings are the best candidates for an SBA 7(a) loan. Most 7(a) term loans are repaid with monthly obligations of principal and interest. There's also various fees related to this type of government program. Insist upon transparency so you will not be surprised by added costs. Despite fees, SBA7(a) loans are vastly less expensive than most of the alternative financing and alternative lender options. For an summary of SBA loans, visit the SmartBiz Loans website here: Obtain the defacto standard in small company lending.
- The CDC/504 loan program
This program is described by the SBA like a win-win-win for the small business, the community, and participating lenders. Designed to give smaller businesses low-cost funds for expansion or modernization, as much as 50% of project cost is funded with a lender backed by the SBA. CDCs (Community Development Corporations) typically fund as much as 40% of the project cost. The ultimate 10% is really a cash down payment likely to range from small business owner.
- The Microloan program
The SBA Microloan Program differs from other SBA loans. The SBA loans money to intermediary nonprofit lenders who then fund loans to startups and small businesses, as much as $50,000. In 2022, the average microloan was approximately $14,000. Many of these loans are granted to businesses run by women, minorities, or veterans. If you need under $50,000 with higher credit and have a business plan, a microloan may well be a fit to fund your company. If you need more than $50,000 and have poor credit, a microloan isn't for you.
- SBA disaster loans
SBA provides low-interest disaster loans to help businesses and homeowners recover from declared disasters. These types of loans include: physical damage loans, mitigation assistance, Economic Injury Disaster Loans (EIDL), and military reservist loans. For a comprehensive overview of these types of loans, go to the official SBA website.
- SBA express loans
SBA express loans are a simple method to receive expedited, amortized government-guaranteed financing for the small company. Entrepreneurs could be granted as much as $350,000 of capital by means of whether term loan or credit line. Once received, this capital can be utilized for various business purposes.
- SBA lines of credit
With an established line of credit with the SBA, business owners can draw funds from this by looking into making a direct deposit into your business bank account, or by using a convenience check linked to the line of credit account.
Benefits of the SBA 7(a) loans
SmartBiz Loans offer flexible and low-cost SBA 7(a) loans. Our financial professionals are on hand to explore how the loan will positively impact your business, take you step-by-step through the streamlined, online application, and respond to questions that might arise. The advantages of SBA loans include:
- A low interest rate rates
Interest rates for SBA loans are essentially as low as they get. Your interest rate is determined by your own creditworthiness and the qualifications you demonstrate. Unlike other types of term loans, it's unlikely that you will see rates of interest climbing in to the double digits.
- Low monthly payments
Because of the long terms of an SBA 7(a) loan, monthly obligations are extremely small. This can help you manage cash flow and steer clear of can not meet your obligations.
- Capital availability
An benefit of SBA loans may be the access to capital allowed. You can borrow as much as $5 million, meaning borrowing the capital you need can be done.
- Repayment terms
One key benefit to SBA loans is their terms: longest repayment terms, (10 years for a working capital loan, Twenty five years for any real estate loan) along with a payment schedule that shouldn't put financial stress on your business.
- Flexible fund use
With an SBA 7(a) loan, you can use the funds for almost anything. The relation to use for SBA 7(a) funds are broad-you can refinance existing debt, buy land, purchase inventory, make upgrades.
How to get an SBA loan
Before you begin the borrowed funds process, check your eligibility to have an SBA loan. Requirements include:
- 2+ years in business
- Business owners must be U.S. citizens or legal permanent residents
- Business owners' personal credit score should be above 650 (675 for an SBA commercial real estate loan)
- Business and private income to service all debt payments demonstrated by tax returns and interim financial data
- No bankruptcies or foreclosures in the last 3 years
- No outstanding tax liens
- No delinquencies and/or default on government loans
It's a good idea to have required paperwork in order before you begin the loan process. No matter which lender you're working with, having all of the necessary documentation is vital to obtaining your funds as fast and efficiently as possible. Some of the most common documents that bank partners within the SmartBiz network request include:
- Personal & Business Tax Returns
- Personal Financial Statements, required from each individual owning 20% or even more from the company
- Profit and Loss Statement – Ideas to prepare this statement can be found here
- Balance sheet – Learn to make a balance sheet around the SmartBiz Blog
- Collateral – Details about collateral requirements can be found on SmartBiz University
Choose your lender
Although SmartBiz Loans isn't a lender, we use multiple banks to help match you with the lender most likely to fund. This enables you to save time when selecting a lender. You won't have to go from bank to bank to find the right funding fit.* Here are some guidelines when you are searching for the best way to secure an SBA loan:
Transparency
Lenders should disclose an annualized interest rate or APR in an easy-to-understand manner. Although APR is widely recognized as the standard for loan cost, SmartBiz recommends using the \”Loan Constant\” to discover the true price of financing. Learn more about the borrowed funds constant here.
No Hidden Fees
When researching loans, don't forget about additional packaging or other types of fees. Lenders should clearly state the fees that will be due before financing is funded and during the life of a loan. Fees normally included are an assurance fee, origination fees, packaging fees, and shutting costs.
Easily understood terms
You shouldn't need a degree in finance to understand the relation to the loan agreement. Be sure to review closely prior to signing the contract and get questions if anything is unclear. Find a glossary of small business loan terms around the SmartBiz Small company Blog.
Stellar customer support
Is there a fast and simple way to reach your lender? If you are working with an online lender, are you able to get the telephone for just about any questions or concerns? Whenever you call your lender, you should have a dedicated representative that is familiar with your business and your application. An unresponsive lender might be a red flag.
Final thoughts
Once the loan qualifies, estimates are it must take approximately 5-7 working days for your funds being available. Look at your finances and determine how to best use the proceeds to stabilize or grow your business. SBA 7(a) loans can generally be used for capital or debt refinance. Your company plan will help you best allocate the funds. It's also a good idea to sign in with your accountant or any other financial professional to discuss.
