SBA Loans Flowchart: Which SBA Loan is Right for Me?
Think you're ready to take out an SBA loan? Follow our flowchart to see which loan best fits your needs. Keep in mind, while we've made this tool as accurate as possible, nothing beats meeting with a loan expert to talk details. Contact our team for a free consultation on SBA loans.Start Your Application and Unlock the Power of Choice$5.6M offered by a Bank at 6.1%$1.2M offered by a Bank at 6.0%$2M offered by an Agency at 5.6%$1.4M offered by an SBA Lender at 9%Click Here to Get Quotes!
To learn more about the SBA 7(a) loan program or to get a free SBA loan quote, click the button below!
What are the different types of SBA loans?
The Small Business Administration (SBA) guarantees many different types of loans to meet the unique needs of most small business owners. The most widely used loan is the SBA 7(a) loan, but there are other options available. Other types of SBA loans include:
- SBA 504 Loan Program
- SBA Microloan Program
- SBA Disaster Loan Program
- SBA Express Loan Program
- SBA Export Loan Program
- SBA CAP Lines Program
For more information on each of these loan programs, please visit the SBA Loan Comparison Chart.
What are the eligibility requirements for SBA loans?
The eligibility requirements for SBA loans include:
- Being in an approved industry (i.e. no gambling, lending, real estate investment, or speculation-based businesses allowed)
- Being a for-profit company based in the U.S.
In addition to the eligibility requirements, there are a few additional qualities which can increase your likelihood of SBA 7(a) loan approval:
- A good credit score - preferably above 680.
- A history free from recent bankruptcies, foreclosures, or tax liens.
- Having been in business for at least two years.
- The ability to provide collateral for loan requests over $25,000.
- The ability to make a down payment of 10% if your intended use of funds is to purchase a business, commercial real estate, or business-related equipment.
- Sufficient cash flow to meet your debt obligations.
- Sufficient working capital (once you subtract liabilities from assets).
- “Good character” according to the SBA (partially decided based on your track record of managing your resources and day-to-day business affairs).
For existing businesses over 2 years old, additional requirements include:
- Business must have positive cash flow
- Decent credit score (minimum of 575 for many lenders, though a score of 620-640 is preferred)
- At least two years of experience in the industry
- Sufficient collateral, or a co-signer with collateral and good credit
For start-ups, additional requirements include:
- Owners must have at have put at least 25% of their own funds in the business
- Good/decent credit
- At least two years of industry experience
- Sufficient collateral, or a co-signer with collateral and good credit and the ability to potentially repay the loan
- Strong business plan, including financial projections and market analysis
What are the advantages of SBA loans?
The Small Business Administration (SBA) offers a variety of loan products that can help small businesses access capital. These loans are backed by the government, which makes them attractive to lenders, and they can be used for a variety of purposes, including operating capital, long-term fixed assets, and cash flow problems. Advantages of SBA loans include:
- Lower down payments and longer repayment terms than traditional loans.
- Competitive interest rates.
- No collateral required for loans up to $25,000.
- Flexible repayment terms.
- No prepayment penalties.
- No minimum credit score requirement.
For more information on SBA loans, please visit www.sba7a.loans/sba-7a-loans-small-business-blog/sba-startup-business-loans-2018 and www.sbaexpress.loans/blog/what-is-an-sba-loan.
What are the disadvantages of SBA loans?
SBA loan disadvantages include:
- Lengthy approval times (for standard SBA 7(a) loans)
- Lots of documentation
- Collateral is often required
- Certain businesses, including real estate investing, lending, gambling, and speculation are prohibited
- High credit scores are typically required (typically 680+)
- May be restrictions on supplemental/additional financing
How long does it take to get an SBA loan?
The length of time required for an SBA 504 loan to be approved can vary drastically, but averages between 60 and 90 days. With that being said, it may take up to six months in some situations. There is no hard and fast rule here, and each situation will be unique.
An SBA Express loan is very fast. Expect a determination on your application within three days, maximum. And after that, funds will typically be dispersed in as few as 20 days.
The SBA 7(a) loan, on the other hand, takes a bit longer. Approvals take up to two weeks, generally speaking, and fund dispersal can take up to a month and a half following an approval.