If you’re a small business owner, you may be considering an SBA loan to help finance your business. But what does the process entail? Below are some common questions from our clients about getting an SBA loan.
What are the different types of SBA loans?
The different types of SBA loans are below:
- Standard 7(a)
- 7(a) Small Loan
- SBA Express
- Export Express
- Export Working Capital
- International Trade
- Preferred Lenders
- Veterans Advantage
What is the difference between SBA 504 and 7a?
SBA 504 loans are larger, longer-term financing options for your business that can be used to help with the purchase or renovation of assets. These types typically have terms up to ten years and interest rates as high as 8%. In contrast, 7a loans offer smaller amounts.
Who qualifies for a 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 SBA 7a loans require collateral?
Some people are wondering if they need collateral to get a 7a loan. No for loans up to $350,000. Anything more than $350K and SBA will ask for as much collateral to match the loan amount as possible.
What is the maximum term on an SBA 7a loan?
Loan terms for an SBA 7(a) loan can be as short as five years, or they may last up to twenty-five years. The maximum term length depends on how the funds will be used – ten years for buying equipment, twenty-five years for buying real estate, etc.
How long does SBA 7a take?
According to the SBA website, the SBA 7a loan usually takes about 5-10 business days to underwrite. However, many other steps make the process take about 2-3 months.
How hard is it to get a 7a loan?
Is it hard to get approved for an SBA loan?
The SBA loan application process can be considered very difficult compared to other business loans. This is true because it has eligibility requirements and mainly due to its underwriting procedure, which includes extensive paperwork.
Why do SBA loans get denied?
The common reasons SBA loan applications get denied include low credit scores or not having enough payment history with vendors. There may also be other red flags like bankruptcy in your past, character issues (e.g., criminal records), and a lackluster business revenue stream.
How long after SBA approval are funds available?
After SBA approval, the estimated availability time can vary depending on the lender and fund type. Once your loan is approved, it’s expected that you’ll have access to funds within five to seven business days.
Do you have to pay back an SBA loan?
Yes, you must pay back your SBA loan according to the terms in your loan agreement.
What happens to my SBA loan if I go out of business?
Many people take out SBA loans to start or expand their businesses. However, if the company fails and cannot pay back its SBA loan in full within six months, it can file for bankruptcy protection to discharge its obligation to pay.
Are SBA disaster loans ever 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.
Will the government forgive SBA loans?
The SBA will not forgive 100% of what you owe, but they do have the room to make a compromise. If the compromise is approved, your loan will be classified as “Compromised/Closed” instead of something more derogatory on your credit report.
How does the SBA loan get forgiven?
To apply for direct forgiveness through SBA, you need to determine if your lender participates in this program, complete the correct form and submit the form with the required documents.
How do I get my SBA disaster loan forgiven?
The SBA offers disaster loans to help small businesses and entrepreneurs in need. If eligible, your loan may be forgiven if used for certain expenses like payroll maintenance or increased materials costs since a natural event has interrupted business operations.
Can I use an SBA loan 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 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.
What can I use my SBA disaster loan for?
SBA disaster loans can provide financial relief for those who have suffered damage 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.
Do SBA disaster loans require receipts?
The SBA requires you to obtain receipts and maintain good records of all loan expenditures to restore your damaged property.