What is the Small Business Administration (SBA)?
The Small Business Administration, also known as the SBA, is a U.S. government agency tasked with providing assistance and support to small businesses across the country. Founded in 1953, the SBA’s activities are often summarized by using “three C’s” of capital, contracts and counseling.
The Small Business Administration, also known as the SBA, is a U.S. government agency tasked with providing assistance and support to small businesses across the country. Founded in 1953, the SBA’s activities are often summarized by using “three C’s” of capital, contracts and counseling. The SBA helps businesses get capital by guaranteeing loans, and in some cases, providing them directly, assists businesses with obtaining government contracts, and provides counseling in the form of training and support for small business owners working in a variety of different industries.
What are the Most Popular Loan Products Offered Through the SBA?
The most popular loans that the SBA guarantees are the SBA 7(a) loan, which provided nearly $26 billion in financing to lenders in 2017, and the SBA 504 loan program, which provided almost $10 billion to small business borrowers in that same year. Other popular loan types include the SBA CAPlines program, which provides a revolving line of credit for small businesses, and SBA Export Loans, which help U.S. businesses expand export operations and enter foreign markets. The SBA also offers SBA microloans, which provide loans to businesses of $50,000 or less, and SBA Disaster Loans, which are provided directly through the SBA (not a third-party lender), and are designed to help small businesses and families recover after natural disasters like hurricanes, floods, and tornadoes.
Other SBA Programs for Small Business Owners and Entrepreneurs
In addition to guaranteeing loans, the SBA also provides a variety of support programs for entrepreneurs across the U.S. These include:
Small Business Development Centers: The SBA helps fund around 900 Small Business Development Centers (SBDCs) across the U.S., which are often located at colleges and universities. SBDCs can help entrepreneurs work on their business plans, provide them assistance with manufacturing, financial advice, as well as help them apply for other SBA programs, like the SBA 8(a) Business Development program.
SCORE: The SBA’s SCORE program has developed into the America’s preeminent network of volunteer business mentors. Since 1964, SCORE has helped educated 10 million business owners via free workshops, seminars, coaching, and other educational programs.
Women’s Business Centers: Partially funded by the SBA, Women’s Business Centers (WBCs) are intended to help women entrepreneurs start small businesses. While anyone can get assistance through a WBC, they are committed to focusing a large amount of their efforts on serving those that are economically or socially disadvantaged. There are 100 over WBCs across the country, and combined, they serve more than 100,000 female entrepreneurs each year.
What types of businesses are eligible for SBA loans?
The Small Business Administration (SBA) offers a variety of loan products to help small businesses get the financing they need. The SBA 7(a) loan program is the most popular and is available to businesses in a wide range of industries. Eligible businesses include those in the business services and office-based companies sector, such as accounting, consulting, legal services, and more. Other eligible industries include retail, manufacturing, hospitality, and healthcare. You can find a full list of eligible and ineligible industries here.
If your current industry isn’t kicked out of the running due to the ineligible small businesses list, you’ve still got a shot at an SBA 7(a) loan. You’ll need to gather your documentation, follow the full application process and show your lender how you’ll repay the loan. We at SBA7a.loans aim to help you with that.
What are the requirements for an SBA loan?
The requirements for an SBA loan vary depending on the type of loan you are applying for. For an SBA 7(a) loan, you must meet the eligibility requirements, have a good credit score (preferably above 680), have a history free from recent bankruptcies, foreclosures, or tax liens, have been in business for at least two years, have the ability to provide collateral for loan requests over $25,000, have 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, have sufficient cash flow to meet your debt obligations, have sufficient working capital (once you subtract liabilities from assets), and have “good character” according to the SBA (partially decided based on your track record of managing your resources and day-to-day business affairs).
For an SBA 504 loan, the requirements for lenders are that they must meet minimum lending activity level requirements (actively lend to customers), have a board of directors with at least nine directors who vote, have full-time, professional management, have full-time, professional staff, be an SBA-approved private sector lender, and work with CDCs.
What are the advantages of an SBA loan?
The Small Business Administration (SBA) offers a variety of loan products that can be beneficial to small businesses. These loans typically range from $500 to $5.5 million and can be used for most business purposes, including operating capital and long-term fixed assets. Additionally, SBA loans are available to most small businesses with a few easy to remember requirements. For starters, any business seeking SBA financing must be a for-profit company, must be located in and conduct business in the United States, must have owner-invested equity, and must not be receiving funding from any other financial lender. As with any other business financing, business size, ability to repay, and the purpose of the business is also taken into consideration.
The advantages of an SBA loan include:
- The government will cover the loan if a borrower defaults, making banks more willing to offer these loan products to high-risk borrowers.
- The loan can be used to address cash flow problems, payroll, and commercial real estate expenses.
- The loan can be used for most business purposes, including operating capital and long-term fixed assets.
What are the disadvantages of an SBA loan?
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.