Long Island Business loans can be hard and confusing. However,…
Looking for an SBA loan? Delancey Street can help. The Small Business Administration 7(a) loans are one of the best ways to finance your growing business. They’re guaranteed by the federal government, which is why lenders can offer them with flexible terms and low interest rates. Getting an SBA loan is one of the most popular methods of financing your business and growing it. It can be tough, though, to get a loan from the SBA.
Low APR rates from the SBA make it one of the best ways to fund your business. If you have the right know-how and preparation, you’ll be able to secure a low cost business financing option. If you don’t qualify for the SBA loan, there are other alternatives we can offer you such as:
- Term loans
- Merchant cash advances
- Hard money loans
- Invoice factoring
- and more
Here’s what you’ll learn about SBA loans
- Summary of types of SBA loans
- What is an SBA loan
- How do I get an SBA loan
- How long does it take to get an SBA loan
7(a) SBA loan
- Guaranteed up to $5 million
- Great for funding working capital and expansion
- It goes through banks, credit unions, and other lenders
504 SBA loan program
- Guaranteed up to $5 million
- Funding buying land, facilities, etc
- Processed through private sector lenders and nonprofits
- Loans up to $50,000
- Funds for working capital, equipment, starting a business
- Goes through community based nonprofits
SBA diaster loans
- Loans up to $2 million
- Funds for small business owners who are having issues due to natural disasters
- Processed through the SBA
What’s an SBA loan?
SBA loans are small business loans guaranteed by the SBA and issued through banks usually.
The SBA will guarantee up to 85% of loans of $150,000 or less, and 75% of loans of more than $150,000. The average 7(a) loan amount is about $425,500. The program’s maximum funding amount is $5 million.
If you want to open a new location, hire employees, or just need general working capital, then an SBA loan is a great option. SBA loan rates are lower than other alternative forms of financing.
What interest is charged on an SBA loan?
When it comes to SBA loan, lenders set their interest rates based on the prime rate, plus a spread.
The APR on a loan is different from the interest rate. The APR is a % that includes all loan fees in addition to the interest rate on the loan. When you compare one lender to another – it’s important you ask them for their APR – because it’s the only way to accurately compare the TRUE COST of the SBA loan.
What are the terms for SBA loans?
In addition to a low APR, another benefit of SBA loans is that you get immense amounts of time to repay them. Other non-SBA loans don’t offer generous repayment terms. For example, merchant cash advances offer only a 2-4 month term usually.
The SBA loan term will depend heavily on how you plan on using the money.
- Working capital or operations: 7 years
- New equipment: 10 years
- Real estate purchase: up to 25 years
What’s an SBA loan guarantee?
Lenders provide the funds that go towards an SBA loan, but the agency guarantees a part of the amount. The SBA guarantees up to $3.75 million. That means if you default on the loan, the SBA pays out the guaranteed amount. The guarantee lets the lender offer longer terms for repayment. It also means you’ll have a lower monthly payment.
Do SBA loans require a personal guarantee?
The SBA requires a personal guarantee from every owner who has at least a 20% stake, and from other people in the top management positions. A personal guarantee will put you, and your assets, on the hook.
SBA Loan vs MCA vs Invoice Factoring vs Term Loan
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How do I get an SBA loan?
The best place to start is the SBA website. You can visit the website to gather documents, and create your package. Here are some documents you’ll need before applying:
- The SBA’s borrower information form
- Statement of personal history
- Financial statements(personal)
- Income tax returns (3 years personal)
- Business tax returns (3 years)
- Business license/certificate
- Business lease
- Loan app history
After this, you can either Google a local approved lender or ask the SBA district office for some recommendations. Banks follow SBA guidelines but also use their own underwriting criteria to evaluate loan applications. The SBA also has a program called SBA express which responds to loan applications in 36 hours. If your credit and finances are in good shape, the wait could be shorter. The maximum amount for this type of financing is $350,000, and the maximum amount the SBA will guarantee is 50%.
How do I pick the right bank?
If you’re applying through a traditional bank, it helps you work with one that a track record of successfully processing SBA loans. When you approach an SBA lender, you should ask them questions such as: How many SBA loans do you make, how often do you fund them, how experienced is your staff, etc. In general, you should work with a bank that has years of experience processing SBA loans, and can give you the guidance you need.
How long does it take to get an SBA loan?
Applying can take weeks, or months. Your chances are better if your personal and business finances are in good shape. If your company has been in business for at least 2 years, and is profitable, and has sufficient cash flow to support the loan, then it’s likely your company is a great fit for an SBA loan.