Need capital for your small business but are having trouble with traditional funding? An SBA loan can be a great option, offering favorable repayment terms and competitive interest rates.
What is the SBA?
The U.S. Small Business Administration (SBA) is an independent agency of the federal government, with a mission to help Americans start, build, and grow businesses.
The SBA provides many resources to small business owners — business development, government contracting, advocacy — though its most popular service is providing business owners with access to capital they may not otherwise be able to get through traditional sources.
While the SBA does create guidelines for the loan program, it is not a lender or servicer of any loans. Instead, the SBA works closely with approved lenders, like Kendall Bank, who are able to utilize the provided guidelines to originate flexible financing options for small businesses.
What are the benefits of an SBA loan?
The SBA’s goal is to get funding into the hands of small business owners so they can grow their businesses, hire staff, and contribute to the overall economy.
To do that, the SBA guarantees a portion of the loan, which reduces the risk for lenders. As a result, business owners are able to obtain funds for a variety of uses with:
- Longer repayment terms and lower monthly payments
- Lower down payments to help with upfront costs
- Competitive fixed or variable interest rates
To learn more about how an SBA loan could help your business, contact our Commercial Lending Team.
What types of SBA loans are available?
While the SBA offers several different types of loan programs, the two most common are 7(a) Loans and 504 Loans.
The 7(a) Loan Program, SBA’s most common loan program, includes financial help for small businesses with special requirements and offer the most flexible terms. It can be used for virtually anything, including:
- Short- and long-term working capital
- Refinancing current business debt
- Acquiring a business
- Buying out a partner
- Purchasing real estate
- Purchasing equipment, furniture, fixtures, and supplies
The maximum loan amount for a 7(a) loan is $5 million. Key eligibility factors are based on what the business does to receive its income, its credit history, and where the business operates.
The 504 Loan Program provides businesses with long-term, fixed-rate financing up to $5 million for major assets, such as real estate, land, buildings, and equipment. The loans are typically structured with the SBA providing 40% of the total project costs, a participating lender covering up to 50%, and the borrower putting up the remaining 10%.
(504 loans cannot be used for working capital or inventory; consolidating, repaying or refinancing debt; or speculation or investment in rental real estate.)
For more information about which SBA loan is right for your business, contact our Commercial Lending Team.
What are the eligibility requirements for an SBA loan?
SBA loan requirements can vary based on the lender and individual loan program, though standard eligibility requirements include:
- Must be a for-profit business, officially registered and operating legally.
- Must be operating in an eligible industry.
- Certain types of businesses are ineligible for SBA loans, including firms involved in lending activities, any business whose principal activity is gambling and churches and other religious organizations.
- Must be physically located and doing business, or proposing to do business, in the U.S or its territories.
- As a business owner, you must have invested equity — such as time or money — into the business.
- Must have tried to find alternative forms of financing before turning to an SBA loan.
- Must be able to demonstrate a need for loan funds.
- Must be able to show the “sound business purpose” for which you plan to use the funds.
- Must be a small business, as defined by the SBA.
- Cannot be delinquent on any existing government debt obligations.
- No one with 20% or more ownership in the business can be currently incarcerated, on probation, on parole or a defendant in a criminal proceeding.
In addition, you will likely need to provide the following documentation:
- Your personal identification
- Certificate or license for the business
- Proof of business ownership
- Business financials, including financial projects
- Profit and loss statements
- 2 years of business tax returns
- 2 years of personal tax returns
- History of any past loan applications and decisions
To check your SBA loan eligibility, contact our Commercial Lending Team.
How do I apply for an SBA loan?
As the #1 ranked SBA lender in the state of Kansas, the Kendall Bank Commercial Lending Team can guide you through the entire process and help you get the capital your small business needs.
To get started, contact our Commercial Lending Team.