SBA Financing

Who is the SBA and What Do They Do?

The Small Business Administration (SBA) is an independent agency of the federal government that helps Americans start, build, and grow businesses. The SBA provides access to capital, entrepreneurial development, government contracting, and other services to help small businesses succeed.

Who Qualifies for a SBA Business Loan?

To qualify for an SBA loan, you must meet the following criteria:

1. Be a forprofit business operating in the United States.

2. Have a sound business purpose and use the loan proceeds for that purpose.

3. Have reasonable owner equity to invest in the business.

4. Have a credit score of at least history acceptable to the lender and demonstrate an ability to repay the loan from cash flow generated by the business.

5. Not be delinquent on any existing debt obligations to the U.S. government or have defaulted on any previous SBA loans or other federal debt obligations within the past seven years.

Benefits of a SBA Loan

SBA Loan Types

SBA 7(a) Loan Program

The SBA 7(a) loan program is the most favored of all SBA loan options, as the capital can be used for a wide range of business purposes. These loans come in amounts up to $5 million and are available in multiple forms, such as SBA Express loans and CAPLines credit lines. Interest rates are either fixed or variable (typically adjusted quarterly), with the bank lender determining which to offer; your credit score and repayment term will affect the rate. Repayment terms can be up to 25 years for real estate and 10 years for equipment and working capital. Fees include a guarantee fee ranging from 0.25% to 3.5%, plus 3.75% of the guaranteed portion over $1 million; some partnered banks might also charge an origination fee or loan packaging fee.

CDC/504 Loan Program

A 504 loan is an SBA loan that is used to purchase fixed assets, upgrade existing assets, or buy real estate. It is typically composed of a bank loan for 50%, a CDC loan for 40%, and a down payment from the borrower for the remaining 10%. These loans are available in amounts up to $5.5 million and come with either a 10-, 20-, or 25year repayment term. Interest rates on the CDC portion of the loan are subject to SBA rules and typically equal the 5 to 10year Treasury rate + 2.23% to 2.39%, while the bank portion of the loan is not subject to SBA regulation and can be negotiated with the bank. Fees for these loans are usually about 3% of the total amount and can sometimes be financed with the loan.

SBA Microloan Program

A small business or startup can obtain a loan of up to $50,000 from an intermediary nonprofit with the backing of the SBA. This money is lent at a discounted rate and can be used for working capital, equipment, machinery, or supplies. The interest rate on the microloan is determined by your creditworthiness and the specifics of your business and usually ranges from 6% to 9%. The maximum repayment term allowed is seven years, with fees up to 3% of the loan amount (2% for loans with terms less than one year) plus closing costs.

Ready to Apply?

Filthy Rich Idea makes it easy to get a business loan from the Small Business Administration (SBA). Apply online and our lending partner, Business Funding Now, will give you a decision within minutes. One of their Loan Specialists will tailor a loan package for your business needs. As soon as your application and documents are received, a dedicated Funding Advisor will be in touch to discuss the application and next steps if approved. Approval typically takes 24-48 hours, and funds can be deposited into your account the following business day. It’s that simple!

Business Funding - Knowledge Is Wealth

FAQs

What information and documents do I need to apply for funding?

Our lending partners will need 3 months of bank statements, the government IDs of all applicants, 1 or 2 years of business tax documents, business P&L and balance sheets, business licenses and formation documents, and a business EIN.

What is APR?

APR stands for Annual Percentage Rate and is a measure of the cost of borrowing money. It is the interest rate expressed as a yearly rate, including fees and costs associated with the loan. It's a good way to gauge the overall cost of your loan and your planned repayment schedule.

How long does it take to get the money once my business is approved?

Once approved, transfer times vary depending on the lender, but it is possible to receive your capital in as little as 72 hours after approval. Lines of credit, on the other hand, may be used immediately upon receiving approval in some cases.

How do I pay back the funding amount?

Our lenders offer secure digital payment portals so that you can make your repayments on time and without penalty. You may be able to change due dates and other important information.

How To Best Prepare for a Business Loan

Determine the amount of money you will request—and do not request an excessive amount.

Although you may have the option of a small business loan, it is important to only request the amount of money that you need and can afford to pay back. This will demonstrate to your lender that you are financially responsible and increase your chances of approval.

Understand the limitations and costs of your loan.

Before committing to a loan, be sure to consider the speed, flexibility, and cost. Some loans are more or less flexible while others charge for speed. Understand the APR and other associated fees and costs so you can make an informed decision.

Avoid taking out multiple loans.

If you already have a loan, it is not advisable to take out another one. This is calledstacking loans and is generally not allowed, except in certain cases (e.g. having a business line of credit with a term loan). If you stack loans without the permission of your original lender, you could be in breach of your loan agreement and default on your first loan. Before taking on another loan, check with your lender to make sure it is allowed.

Ready to Apply?