SBA Lending

SBA Loans may be used for a variety of purposes, such as working capital, expanding or purchasing a business, new equipment purchases, real estate or operating capital to support current business efforts.

Yes, borrowers can have multiple 7(a) loans so long as each loan fits into SBA guidelines, is in good standing and the total does not exceed $5MM.

The Small Business Administration doesn’t have a fixed minimum personal credit score; however, the lending banks with which they work do have minimums, which are usually around 620. In most circumstances, a score of 680 or higher will likely qualify.

The SBA 7(a) loans can help small business owners refinance existing debt into loans with lower payments and/or longer terms so long as a number of basic requirements are met, including:

• The debt to be refinanced must have been exclusively for business purposes
• The loan can’t be used to refinance business debt that’s already determined to be on reasonable terms
• A loan can’t be used to shift all or part of a potential loss to the SBA
• The debt to be refinanced must have a purpose that would have been eligible for SBA financing when it originated.
• If the debt to be refinanced was used in whole or in part to refinance a previous debt, the current loan must be reported on your balance sheet for two full tax cycles before applying for an SBA 7(a) loan. Documentation to confirm all funds were used only for an eligible business purpose is required
• Individual lenders might have additional restrictions

SBA 7(a) loan rates are negotiated between the borrower and the lender; however, the SBA establishes maximums which are generally based on the prime rate. Loans may be fixed or variable rate.

An SBA loan can be denied if you:

• Can reasonably obtain financing elsewhere
• Have had a past default on a government loan
• Are engaged in illegal activities, gambling or multi-sales distribution
• Are on parole or have been convicted of a felony in the past year

While not all transactions require a business plan,  it is a great starting point for anyone seeking an SBA loan. If one is required, it will be the document most closely scrutinized by lenders.

Retirement funds can be used as a down payment on an SBA loan if you have a 401(k) account or another approved tax-deferred retirement account containing at least $50,000.

Loans guaranteed by SBA range from microloans as small as $500 to as much as $5MM for a 7(a) loan and $5.5MM for a 504 loan. Certain eligible projects may qualify for up to three 504 loans not to exceed a total of $16.5MM. Lenders can choose the types of SBA loans they offer, so not every option may be available from a local financial institution.