SBA Business Loans
Many small business owners find themselves at a crossroads for their business where they need capital. The capital could help them scale up, expand, or simply tide them through a rough patch. President Trump just announced a $50 billion expansion of the Small Business Administration or SBA’s loan program.
For those hurt by the coronavirus pandemic or who have other borrowing needs, this was welcome news. If you need help keeping your doors open or want to fund an expansion, could an SBA loan work for your business? We can help you secure a variety of SBA Loans available and if you do not qualify for the SBA programs we offer a wide variety of private business loans for existing business owners where funding can take place the same day. The process is fast and easy and you can apply online in minutes. Below is a list of the requirements to get approved for business funding with our most basic program. There may be additional factors that are considered, meeting these three requirements though gives you a very high chance of having your application approved.
What Do I Need to Qualify?
Below is a list of the requirements to get approved for business funding with our most basic program. There may be additional factors that are considered, meeting these three requirements though gives you a very high chance of having your application approved.
SBA Coronavirus (Covid-19) Loan Programs
The SBA is offering small business loans to companies that have been affected by the Coronavirus outbreak. The loans range from a $10,000 advance all the way to $2 million dollars. Shield Funding can help you secure this type of funding and we make the entire process fast and simple and you can apply immediately. The funding for the Coronavirus can be under the SBA’s Disaster Relief program or you can apply for one of the many other funding programs they offer. If you do not meet the requirements of any of the SBA loans we also can help you secure an a variety of other business loans if you own a business. Below you will find many of the SBA loans as well as some alternative business funding options.
SBA Loan Programs
The SBA has several loan programs meant to help small businesses succeed. In general, the SBA guarantees 85% of loans up to $150,000 and 75% of loans above $150,000. Because of this guarantee, your interest rate could be as low as 5.50%. Terms can be as short as seven years for working capital loans to as long as twenty-five years for a real estate purchase.
7(a) Loan Program
The 7(a) program funds loans up to $5 million. Acceptable uses of the funds include working capital, expansion, and equipment purchases. Banks, credit unions, and specialized lenders like Shield Funding process the loans.
504 Loan Program
The 501 loan program is slightly different. While you can still borrow up to $5 million, funds must be used for buying land, machinery, or facilities. This type of loan works well if you need to purchase a new warehouse for an expansion. Private-sector lenders and nonprofits process these loans.
If you have smaller capital needs, look into microloans. Under this program, the SBA lends up to $50,000. Capital can be used for working capital, to buy inventory or equipment, or to start a business. If you need this type of loan, you will work with a community-based nonprofit.
SBA Disaster Loans
SBA Disaster Loans step in to fill the gap when a natural disaster or other emergency hurts a small business owner. You can borrow up to $2 million, and this is the only SBA loan processed directly through the SBA.
Borrowing Criteria for SBA Loans
The Small Business Administration makes it easier for small businesses by guaranteeing a portion of their loan. You do not borrow directly from the government but from an approved lender. However, because the government guarantees a part of your loan, the lender has less risk.
Small business owners must have a FICO score of at least 680. They need three years in business, or two if the company has shown particularly strong growth and cash flow. And for many loans, annual minimum revenues must be $1 million.
Size standards vary by industry and could be between 250 to 1,500 employees. Businesses can be privately owned corporations, partnerships, or sole proprietorships. As long as they are not listed on the stock exchange, they qualify.
Documentation Criteria for an SBA Loan
It can take up to three months to get approved for an SBA loan. It is not a quick source of funding; these loans work better for long-range planning and expansion and only apply to for-profit businesses. Part of the reason it can take so long are the documentation requirements.
Lenders typically need to see three years of personal taxes and three years of business taxes. In addition, you must have a current Profit and Loss statement, which shows assets exceeding liabilities and a strong Balance Sheet. Your personal income statement and debt schedule must also show assets higher than liabilities.
The SBA will want to know your intended use of the funds, and you must provide an in-depth explanation. They may request a business plan, and further information and research if they feel that does not give enough detail. Typically, you must complete two applications – one for the lender, and a completed checklist for the SBA – though the lender can help you with the SBA checklist.
While an SBA loan will pay off up to four other debt positions, none of those debts can be an outstanding Federal Tax Lien. If you are refinancing debt, you can only use an SBA loan to refinance debt at worse terms. I.e., the SBA loan needs to have a lower interest rate or longer term than your existing debt.
Alternatives to SBA Loans
What if you do not qualify for an SBA loan? Or, what if you need capital faster than a few months? Shield Funding offers several alternatives.
Bad Credit Business Loan
The term “bad credit” merely refers to loans to borrowers who fail to meet a traditional lender’s standards. This could be due to your time in business or minimum revenues and be completely unrelated to your credit score. However, Shield Funding does lend to small business owners with credit scores as low as 500.
To qualify for a bad credit business loan, you must have two months in business and minimum monthly revenues of $8,000. You can borrow in smaller amounts than SBA loans, as little as $5,000. We can approve loans within 24 hours and disburse funds within two to three days. Without a government guarantee protecting a lender from default and depending on your credit profile, interest rates will range from 12% to 45%.
Short Term Business Loan
Short term business loans fit short term needs – like getting through a temporary economic downturn. They have terms of six to twenty-four months and interest rates from 9% to 45%. To qualify, borrowers must have a minimum credit score of 650, been in business for one year, and have $10,000 a month minimum revenue.
If you have a better credit score, you will pay less for a short term loan. After a quick approval process, funds can be deposited in your bank account in a few days.
Whether an SBA loan or another loan would work better for you, Shield Funding has the loan products to meet your needs. To learn more, reach out to talk to a lending specialist today.