Are you looking to get an SBA loan for your small business? If so, you’re probably wondering what the process entails. To help you out, we’ve put together a Q&A on the subject. Keep reading to learn everything you need to know about getting an SBA loan.
What are the SBA eligibility requirements?
Qualifications for an SBA loan for most programs include but are not limited to:
- Must be a for-profit business that does or will be doing business in the U.S. or its territories.
- A reasonable amount of owner equity to invest
- Use personal and alternate resources for funds before applying with the SBA.
What disqualifies you from getting an SBA loan?
You have a low overall personal or business credit score, which means lenders consider your financial situation risky. You don’t meet criteria such as having sufficient collateral (i.e., property) to cover potential obligations on the loan in case of default. The type of business you’re in also plays a role in qualification.
How do I qualify for an SBA 7a loan?
To be eligible for the SBA 7(a) loan, you must meet several preliminary requirements. Your company must be officially registered as a for-profit business that wishes to do business in the United States or its possessions. You’ve got to have a reasonable amount of invested equity and be small, as defined by SBA.
The SBA also likes to see that you’ve invested personal assets in the business, proving your commitment to being vested and successful. Last but not least, don’t be delinquent on any U.S. government debt.
Do 7a loans require collateral?
Some people are wondering if they need collateral to get a 7a loan. The short answer is no, but there are limits on how much you can borrow without collateral.
Are SBA 7a loans secured?
The SBA 7(a) loans require collateral to secure the loan above certain thresholds. However, if you want a more considerable sum of money and exceed this limit, then it will have to be secured by the collateral of a particular value.
Can SBA 7a loans be cross-collateralized?
The SBA will not allow loans to be collateralized with other assets. For this reason, it is stated in the 504 loan authorization that cross-collateralization isn’t permitted.
Does SBA check credit?
All Small Business Administration (SBA) loan applicants are evaluated before they are approved for financing, and part of that process is a credit check.
How do you know if you are approved for an SBA loan?
You can find out your SBA loan application status by calling the SBA’s Customer Service Center here.
How do I pay back my SBA loan?
There are three ways to pay back your SBA loan. You can go to Pay.gov and set up an account to pay online, set up an auto online bill pay from your checking account, or mail a check.
What happens if I don’t use my SBA loan?
If you don’t end up using your SBA loan for your business, the best thing to do at that point would be to pay it back immediately.
Can you still get the SBA grant if you are denied the loan?
If you suffer from economic injuries due to COVID-19, there is some good news. The SBA has announced that applicants who apply for an advance on their grant will not have to pay it back if they receive one! This means up to $15k in funding can be provided for free. For standard grants, they don’t have to be paid back either.
What can you use a 7a SBA loan for?
The SBA 7(a) loan is an excellent option for those who need money to start their own business or purchase an existing one. This type of funding can be used in many ways, including working capital and equipment purchases.
What can you spend SBA disaster loan money on?
SBA disaster loans can provide financial relief for those who have suffered damages in natural or man-made disasters. The money is available to help with the following: real estate, personal property such as furniture and appliances, machinery/equipment, including computers, and even inventory.
Can SBA loans be used for anything?
SBA loans can provide you with a quick and easy way to get the funds your business needs for any purchase, whether new equipment or working capital.
Can I use an SBA loan to pay off debt?
Like many small business owners, your SBA loan is for the operation and growth of your company. It cannot be used towards personal debt such as credit cards or other obligations.
Can SBA loans be used for personal use?
The SBA loans are designed for financing small businesses, not personal use. You cannot take out a loan from these sources to pay off other debts such as credit cards and mortgages or any other type of debt that you may have incurred in your life outside the scope of running a business.
Can I use the SBA disaster loan to pay myself?
The answer is no. You cannot. This seems self-explanatory, but some exceptions exist for paying yourself with an EIDL contract.
Can I use my SBA disaster loan for personal use?
An essential part of any business’s toolkit, these disaster loans can be used to help with repairs or replacements after disasters like fires and natural phenomena. In no way should you use any business loan for personal expenses.
Do you have to pay back the SBA disaster loan?
The SBA offers a disaster loan to help those negatively impacted by natural disasters. If you received this type of funding, you need to pay it back with interest on the agreed-to payment schedule.
Do SBA loans need to be paid back?
They do need to be paid back according to the terms in your loan agreement.
Are SBA 7a loans forgiven?
There was a point during the covid-19 pandemic when the SBA forgave the first six months of interest up to $9000 per month, but that program is over now.
What happens if you can’t pay back the SBA loan?
The best thing to do would be to communicate with your lender and let them know if you struggle to keep up with the bills. They may be able to work out a payment plan that can help until things rebound.