Are you considering an SBA loan? If you have an existing SBA loan, or if you’re looking for multiple SBA loans as financing options, it might be possible to get many SBA loans. As long as each of your SBA loans fit within the SBA’s lending guidelines there is nothing preventing you from having more than one SBA loan. This guideline fits to both SBA 7(a) loans and SBA504 loans. IF you get approved for two SBA loans of the same type within a 90 day period, the SBA might treat it as one loan for underwriting purposes.
Because of this, the SBA loan is a great and super flexible funding solution.
Who is eligible for more than one SBA loan?
In order to take out more than one SBA loan, your business will need to do the following:
- Stay within the SBA’s maximum borrowing amount
- For SBA 7(a) loans thats $5 million
- For SBA 504 loans that is $5.5 million
- Remain within the SBA eligibility requirements for businesses
- Keep a good credit score (680+)
- Have collateral for the new SBA loan
- Be in good standing on your existing SBA loans
How many SBA loans can you take out?
In theory there is no limit on how many SBA loans a borrower can take out. As long as you remain within the SBA guidelines. In some cases, some companies have taken out up to 9 SBA 504 loans, within a 15 year period.
Can I have multiple SBA loans?
Yes, as long as your bank allows it. You can have multiple SBA loans outstanding at the same time. The total amount borrowed via SBA loans cannot exceed SBA program limits. In order to qualify for multiple SBA loans your first loan MUST be in good standing. You must have positive cash flow, strong credit, and collateral.
Sometimes a single loan isn’t enough to reach your goals.
If that’s the case, borrowing multiple loans amplify your growth. Small business owners apply for multiple SBA loans because they are affordable, and have favorable repayment terms. It’s definitely possible to have multiple SBA loans, although there are restrictions you need to be aware of. Each SBA loan program has borrowing limits. You also have to meet the SBA’s and the lender’s eligibility requirements for every loan you borrow.
Plus, because you can take out many SBA loans – doesn’t mean you should.
Can you have multiple SBA loans
Although many small business owners don’t know it, it’s common to have multiple SBA loans. Once a business owners borrows money with an SBA loan, they turn to the SBA again because of the cost and terms. In general, a business must meet the following requirements in order to be eligible for multiple SBA loans:
- Each loan must meet the SBA eligibility requirements and the lender’s eligibility requirements
- You can’t use a second SBA loan in order to pay back the first SBA loan, except in cases where the borrower has new funding necessities which the existing SBA lender can’t accomodate
- Your current SBA loan has to be in good standing
- You can’t exceed the SBA loan borrowing limits
- You have to be able to demonstrate positive cash flow
- You must have a credit score over 650
- Depending on the loan amount, you must sign a personal guarantee on each loan, and provide collateral
There is no SBA rule that limits you to one loan.
Technically you can have 2, 3, or even more SBA loans at a time. Some banks have policies limiting business customers to one SBA loan, or requiring a certain amount of time to pass before you can apply for a second SBA loan.
What are the borrowing limits for SBA programs
Here are the borrowing limits for the various SBA loans:
SBA 7(a) loans: $5 million maximum
SBA community advantage loans: $250,000 maximum
SBA express loans: $350,000 maximum
SBA 504 loans: $5 million maximum
SBA microloans: $50,000 maximum
The total amount of money borrowed with a single SBA loan or multiple SBA loans cannot exceed these limits. The aggregate balance must remain within these limits, even if you’re working with several different lenders. The only way lenders can avoid these limits is to place you in a non-SBA loan product.
Combining different types of SBA loans
Each SBA loan is designed to address different business needs. For example, the SBA 7(a) loan is designed primarily for working capital. SBA 504 loans are designed for purchasing real estate and equipment. There are limits though. There are no SBA rules which prohibit you from combining different types of SBA loans.
How to qualify for multiple SBA loans
Getting multiple SBA loans could be the answer to your business funding needs. You have to qualify for each loan though. Lenders, who do the underwriting, and the SBA, place a huge amount of importance on the following items in your SBA loan application: cash flow, credit, and collateral. Whether you apply for one loan, or multiple loans, you need to satisfy these 3 basic requirements.
The biggest challenge you’ll face when applying for multiple SBA loans is that you have to show the lender that you have enough cash flow to pay back all debt. Cash flow is all about the pattern, and frequency with which money enters and leaves your business. Good SBA lenders won’t approve your business for a second SBA loan if you aren’t positive in terms of cash flow. Lenders will use documents like tax returns and financial statements to calculate your debt service coverage ratio. DSCR compares your business income to your outstanding loan payments. The specifics vary, but most lenders will look for a DSCR greater than 1.25 to show you can cover your monthly loan payments. Some lenders also look at global debt service coverage ratio which includes your personal income, and personal debt.
Make sure your credit is good when trying to get multiple SBA loans
Requirements vary by loan program. In general, if you want multiple SBA loans, you should have a personal credit score greater than 650. Your FICO business credit score also comes into play. The SBA requires a minimum score of 140, for SBA 7(a) loans up to $350k.
If your credit has gone down since your first SBA loan then qualifying for a second SBA loan can be super difficult.
SBA lenders will put a lien on your business property. If you have multiple SBA loans, and the bank feels their risk has increased, then they could ask for more collateral. Additional collateral can mean business assets, life insurance policy, real estate, or more. The more debt you take on, the more collateral you need to pledge.