SBA Business Loans: Do You Qualify?

Small Business Administration (SBA) loans are the best business loans you can find. They offer very low interest rates. They also offer the longest repayment terms you can get. This makes them an affordable and flexible option. The only catch to SBA business loans is that they are hard to get. Their requirements are stringent. So, they are only available to the most stable and well-established small businesses.

Let’s go over the details of what makes SBA business loans so great. Then, we will go over their requirements and some lenders that offer them.

What Makes SBA Business Loans Better?

Business loans from the SBA are superior in several ways, often referred to as the “Rolls Royce” of business financing.

Loan Balances & Funding Amount

The amount of money you can get with an SBA business loan is far higher than you’ll find with most other kinds of business loans. Some alternative business lenders can provide higher amounts. They usually only do so under specific circumstances. But SBA loans offer consistently high funding.

An SBA business loan can land you anywhere between $500 and $5.5 million. They come in several forms and have many applications.

Rates

For current interest rates, please see our SBA loan rates page.

SBA business loans must meet the high standards set by the SBA. The maximum interest rates given with any of their loans won’t exceed 13%. For SBA CDC/504 business loans, rates start at just 3.63%. Minimum rates for the more common SBA 7(a) (read below) loans will vary but start around 7%.

These rates are excellent. They won’t be matched by most other business lenders offering other types of loans.

You can find loans with these rates from a variety of lenders. Both banks and alternative lenders may offer SBA loans. SBA loans are not provided by the SBA, but the SBA sets the standards that lenders offering SBA-approved loans must follow.

In many cases, alternative lenders may state they offer APRs of 6% or lower. When an alternative lender states they offer APRs ranging from less than 6% to over 50%, they likely offer the whole spectrum of loans, from SBA loans to merchant cash advances. So, if you qualify, always try to take any SBA loan options over other options.

Repayment Terms

This is perhaps the strongest selling point for an SBA loan. Repayment terms start at 7 years for working capital loans. Equipment loans have repayment terms of 10 years.

So, the minimum repayment term for an SBA loan is 7 years. But 7 years is still a great repayment term for working capital loans. For longer-term real estate loans, the SBA gives repayment terms of 25 years. So, SBA loans are the safest and most efficient way to finance real estate.

One Small Drawback: Limited Uses

SBA business loans offer amazing rates. But they can only be used for a few purposes. This contrasts heavily with other loan types with far fewer restrictions on how you use them. You will need to justify your need for funding to get an SBA loan.

SBA Business Loan Requirements

SBA loans for an established business are not the easiest loans to qualify for. There is a long laundry list of paperwork that can be found on their site. To be considered, you will need to be able to show:

• Equity invested in your business
• That you’re in an eligible industry
• The size of your business
• Your loan application history
• A well-developed business plan
• Your business credit report
• Personal financial statements of anyone who owns 20% or more of your company
• Financial projections for your business

You must also sign a personal guarantee for an SBA loan. Specific requirements are subject to changes. SBA business loans also take the reputation of the borrower into account. So, they’ll want to look into every aspect of your business and your personal managerial experience.

SBA Business Loans For Starting A Business

You can also use an SBA loan to start a business. SBA 7(a) loans are meant for covering startup costs. They are available in amounts of up to $5 million. To qualify, you will have to already have invested a significant amount of money into your business.

SBA 7(a) loans can be used for new real estate. Their repayment terms are long, up to a maximum of 25 years.

Where Can I Find SBA Business Loans?

You can find an SBA loan from any business lender that offers them. Big banks will usually offer them. There are also several alternative business lenders and lending marketplaces that offer them.

Main Street Finance Group

Main Street Finance Group offers SBA 7(a) loans for qualified applicants. While they offer loans for struggling business owners as well, their SBA 7(a) program is ideal for startup costs. The APRs for their SBA business loans start at just 5.99%. They also allow you to apply conveniently online.