SBA Loans: The Key to Small Business Success

Introduction

You might have heard SBA loans are the gold standard for small business owners who want to expand. It’s true. Funds from these loans can be used in a multitude of ways to help a small business grow. Small businesses are the backbone of the American economy, creating jobs and driving innovation. However, starting, managing and growing a small business can be a challenging task, especially when it comes to securing financing. That’s where SBA loans and lines of credit come in. The SBA is a Government Vehicle that allows banks to lend money to borrowers while the SBA mitigates the majority of the bank’s risk. They offer Lines of Credit / 100% Equipment financing over 10 years / Working Capital / to Purchase a business / a building and or refinance any commercial debt.

What Are SBA Loans

SBA loans are a type of financial assistance provided by the Small Business Administration for small businesses in need of funding. These loans are designed to help entrepreneurs start or grow their businesses, providing them with the resources they need to succeed. Whether you’re looking to purchase equipment, expand your operations, or cover day-to-day expenses, an SBA loan may be the right choice for you The Small Business Administration (SBA) is a government agency that provides support to small businesses through various loan programs, the majority of which are processed through specialized lenders. These loans are designed to help small businesses access the capital they need to start, grow, or expand their operations. The loans are in two categories which are 7a loans (Ranging from seven to 25 years) and SBA 504 loans (Typically used to purchase real estate with only a 10% down payment required and fixed rates up to 25 years).

SBA Loans: The Basics

A lot of people think that the SBA hands out money directly to small businesses, but that’s not the case. Actually, the SBA provides a guarantee on the loan, which means that if the borrower can’t repay the loan, the SBA will step in and help out. This makes it less risky for the lender, so more banks are willing to offer loans to small businesses. The good news is that many banks and other financial institutions offer SBA loans, but keep in mind that the process, requirements, and fees can vary from one lender to another.

Benefits of SBA loans

When you go for an SBA-guaranteed loan, you get a lot of benefits. The first one is that these loans have great terms. You can expect rates and fees that are just as good as other types of loans. Another perk is that some SBA loans come with extra support, like counseling and education. This can help you start and run your business more effectively. Lastly, SBA loans have some unique benefits that set them apart. For example, you might only need to put down a lower amount, the overhead requirements might be more flexible, and in some cases, you might not even need to provide collateral.

Finding an SBA Loan Provider Has Never Been Easier

Gone are the days when small business owners only had one option for applying for an SBA loan – a brick-and-mortar bank. While one bank might not be interested, another might be a perfect fit. Thanks to technology, small businesses can now find SBA loan providers online with ease. The USA Funding has helped countless applicants who were initially rejected by their local banks successfully secure an SBA loan. How do we do it? We perform a detailed review of our client’s financial situation free of cost, in order to determine their ability to obtain financing with one of our partner lenders. Our team of professionals will take a detailed application and orchestrate the entire loan package for you. We will directly coordinate with the borrower’s CPA, attorney, and other professionals in order to facilitate a fast approval and then closing. Say goodbye to the hassle of going bank to bank and hello to a quick and efficient loan application process with USA Funding!

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The maximum loan amount you can get through this program is $5 million, but for strong borrowers, participating lenders can increase the loan amounts OVER the $ 5 million threshold. Just keep in mind that your eligibility will be based on the company’s ability to repay the proposed loan, your credit history, and your overall project request.  The good news is, USA Funding will work with you to figure out which loan is the best fit for your needs.

7(a) Eligibility Criteria

So, what does it take to be eligible for SBA’s 7(a) loan program?

Well, there are a few key criteria to keep in mind:

• Your business must be profitable
• It has to be considered a small business by SBA standards
• You need to be doing business or planning to do business in the US or its territories
• You should have a reasonable amount of invested equity
• You should have tried other financial resources, like using your personal assets
• You have to prove that you need the loan
• The loan must be used for a legitimate business purpose
• And lastly, you can’t be behind on any debt payments to the US government

Not every business is fit for the 7(a) loan program. Learn more about the eligibility requirements, terms, and conditions,  or by speaking to a USA Funding representative today.

Got a 7(a) loan? Here’s what you can do with it!

A 7(a) loan can be used for a multitude of business requirements and objectives, such as:

• Covering both long-term and short-term working capital
• Making sure you have enough cash flow with revolving funds based on your inventory and sales
• Outfitting your business with new equipment, furniture, or supplies (up to 10 years with no prepayment)
• Growing your business by buying real estate or building a new location
• Expanding or acquiring an existing business
• Getting a handle on existing debt by refinancing, under certain conditions
• Refinance short-term debt
• Pay down Accounts Payable
• Purchase inventory
• Buy out a partner
• Make capital improvements

504 Loan Program

Another popular SBA loan program is the 504 loan program, which provides long-term, fixed-rate financing for the purchase of owner-occupied property (51%).

The maximum amount of a 504 loan is $5 million. For energy-related projects, the borrower may be able to receive up to three loans, each with a maximum of $5.5 million, with an aggregate total of $16.5 million.

504 Loan – Eligibility Criteria

Do you want to find out if you qualify for a 504 loan? Here’s what you need to know:

• Your business must be a for-profit company operating in the US or its possessions
• Your business’s tangible net worth must be less than $15 million
• Your business’s average net income after taxes must be less than $5 million for the past two years

Keep in mind, there are other eligibility requirements too, like having a solid business plan and management team, and the ability to repay the loan. Unfortunately, businesses involved in non-profit, passive, or speculative activities won’t be eligible.

Got a 504 loan? Here’s what you can do with it!

A 504 loan can help you grow your business and create jobs by financing big projects like:

• buying a building, constructing a new facility, or upgrading your current one
• Improvement or modernization of current land, streets, utilities, parking lots, and landscaping features

If you’re looking to take advantage of the program, here are some other benefits to consider:

• Only a 10% down payment is required
• You’ll get a blended interest rate between the lender and the specialized bond
• Your interest rate will be fixed
• You can have terms of up to 25 years
• You can use the funds for renovations or modernization
• Closing costs can be included in the loan amount
• You can rent out up to 49% of the property’s square footage.

But, here’s what you can’t use it for:

• Day-to-day expenses like working capital or inventory
• Paying off debt, or
• Just investing in rental real estate.

If you’re buying an existing business, you’ll also need to provide:

Expert Assistance at USA Funding

At USA Funding, we understand the unique challenges small businesses face when it comes to securing financing, that’s why we offer expert assistance with SBA loan applications. Our team of experienced lenders, comprised of former high-level bankers and accountants, will work with you to customize the best loan program for your specific needs and guide you through the application process regardless of what specialized help you require

Conclusion