An In Depth look at an SBA Loan

The Small Business Administration (SBA) was founded more than sixty years ago. In the time since, its mission has been to assist small businesses throughout their life cycle. They do this by acting as the loan guarantor for small business loans as well as providing working capital for small businesses and other forms of business assistance. SBA loans are notoriously hard to get, although the experienced guidance of a company like Alliant Business Systems can be a significant help.

Types of SBA Loans

There are several types of SBA loans. The needs met by those loans, and the requirements that need to be met for each, can vary widely.

  • Microloans are issued by nonprofit lenders. They are intended for small expenditures (like working capital) and have short repayment terms.
  • SBA Express Loans are revolving lines of credit. Their application process and approval are typically faster than the other offerings listed here.
  • SBA Veterans Advantage loans are either Express or 7(a) programs intended for businesses with at least 51% ownership by veterans or active-duty service members.
  • 504 Loans are long-term fixed asset loans for machinery, real estate, and similar purchases. They’re issued through Certified Development Companies (CDCs) and secured by an asset lien.
  • 7(a) Loans are term loans with fixed maturity and no repayment penalties. The most popular SBA loan type, they can be used for anything from startup costs to renovation, working capital, or seasonal lines of credit.

A range of other loans — including for IMEX, disaster recovery, and a variety of other specialized purposes — are also available, but those listed above are the most popular.

Who Qualifies for an SBA Loan?

If you answered “Small businesses, obviously,” don’t pat yourself on the back just yet. The SBA defines what a “small business” is much differently for a telecom firm or a farm than they would for a small proprietorship selling cupcakes. Number of employees, annual receipts, and business sector all come into account, and some segments — including gambling and adult entertainment — are summarily disqualified.

SBA 7(a) loans further require your business to demonstrate proper management, good character, credit in good standing, and the ability to repay. Each other SBA program has its own unique requirements, which can make navigating the application process a significant challenge.

Applying for an SBA Loan

In light of the preceding, expect a long and sometimes arduous application process. Your business’s financials and credit history will be put under the microscope; expect the same for the business’s principals. Your business plan, P&L statements, accounting, and financial reporting must all be comprehensive and accurate.

Providers, Rates, and Terms for SBA Loans

Loan terms will vary depending on the type of loan. Each type is capped at a maximum amount, and repayment terms and APR will likewise vary from one loan type to the next. Those loans also aren’t issued directly by the SBA, which merely acts as a guarantor; the loan is issued through a bank or credit union, and the institution you’re already using for your business banking may be among them.

Additional Services

If you’re a small business owner navigating the SBA loan process for the first time, you’re likely to feel overwhelmed and even a bit intimidated. There are some resources available to help.

  • The SBA itself offers a wide range of articles and explainers.
  • The Service Corps of Retired Executives (SCORE) is an SBA-affiliated mentorship network that provides help to small businesses nationwide.
  • Alliant Business Systems offers a solid foundation upon which to build business credit, from business plans to credit repair and credit monitoring.

Qualifying for an SBA loan is difficult, but it can be made easier. All you need is a firm grasp on your business’s financials, an idea of your goals, and an ally to help you reach them. Start with Alliant Business Systems and you’ll have valuable assistance in accomplishing more than you ever thought possible. Contact us today for a free business credit consultation.