What is an SBA Loan?

An SBA loan is a business loan that is guaranteed by the U.S. Small Business Administration (SBA). An SBA loan is the Holy Grail when it comes to small business expansion. Small business owners can use these funds in a multitude of ways with the aim of business growth through SBA (7a) or wealth creation through the SBA 504 Loan program.  

The SBA essentially guarantees a portion of a loan that is acquired through an SBA approved lender. There are two main SBA funding programs which we focus on. SBA 7(a) and SBA 504.

SBA loans typically can range from around $200,000 up to $22,000,000. The term of the loans can also range from 5 years to 25 years depending on the use of proceeds. The interest rates on SBA loans can be anywhere from mid 3% range to the low 8% range, depending on numerous factors.

Why choose an SBA Loan?

There are a plethora of reasons for taking out an SBA loan for your business. Simply stated, an SBA loan has affordable interest rates, requires a smaller down payment, has favorable repayment terms, and can be used for a myriad of purposes. However, to enjoy the benefits of an SBA loan, you need to know who qualifies for an SBA loan and the differences between each program.

Another reason to choose an SBA loan is that you can often be denied an SBA loan from a bank only to receive approval on the same loan from a nonbank direct lender. Banks are risk averse and slow which doesn’t fit well with most entrepreneurs who value speed. As a nonbank direct lender, SBAright makes a lending decision quickly based on diving into and understanding your unique business situation. You’re not a number or credit score to us. You’re a person, a business owner with a story that we listen to in order to find the best SBA option for you.

Also, it’s easy to use technology to apply for an SBA loan. Each lender will have its own terms for the SBA loan program, but through an online platform like SBAright’s Pronto AI, you can upload all your documentation and receive a loan decision FAST. Two hours and we can get back to you. Why waste days, weeks, even months waiting to see if a bank will approve your loan when we can give you a decision the same day? We spare you the hassle and rejection you would face having to go from bank to bank and make the entire SBA process quick and easy.

Applying for a SBA Loan

Though you may not be applying for a traditional bank loan, if the institution offering the loan is a bank, you can expect the speed, service and bureaucracy associated with an ordinary bank. The only difference is that SBA loans are moderately easier to qualify for than traditional loans.

Qualifying for an SBA loan doesn’t have to be an elaborate and time–consuming process if you choose the right lender. The application process for an SBA loan can seem daunting, but again if you choose the right lender, they will be able to seamlessly walk you through the process.

One of the main determining factors, as with most financing, will be your credit score. Most business owners who qualify have an annual revenue stream of over $350,000 per year, have a credit score of 650, and have been in operation for over three years, but there are many exceptions to these.

You’ll need to fill out and submit the required documentation including financial statements, description of the collateral, a business description and an outline of how you plan to spend the loan among other documents.

The lender offering the loan will want to see a business with a solid credit history, a sound business plan, a business that has been profitable for its recent existence and an ability to repay the loan.

Choosing the right SBA Loan

There are a variety of loan funding programs offered by the SBA but the two most popular programs by far are:

  • The SBA 7(a) Loan Program (general financing needs)
  • The SBA 504 Loan Program (owner occupied commercial real estate and/or heavy equipment)

The SBA loan you qualify for will depend on several factors, mainly about the use of proceeds.