SBA 7a Loan Program

The Small Business Administration (SBA) has quite a few different loan programs that entertain all different kinds of small business structures.  The SBA’s flagship loan program is their 7(a) loan program.  The SBA 7(a) loan program is for small businesses that cannot be approved for a conventional bank loan and are looking to buy a business, start a business, or grow a business with purchasing equipment, software, and other assets.  The SBA does not directly lend SBA 7(a) loans to the business community.  The nations SBA certified banks and lending institutions have that responsibility

You must first be turned down for a traditional bank loan before you can apply for one of the SBA’s 7(a) loans

In order to be approved for any kind of SBA 7(a) loan, you must have a good business credit score with all three business credit reporting agencies, a well written business plan, and a business loan application that has proper financials.

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The SBA has an array of SBA 7(a) loans.  All of them serve a different purpose and entertain different business scenarios.

SBA 7(a) Express Loan Programs
These loans are for a certain sort of small business borrower and can be approved much faster then other  SBA loans

SBA Express – This program gives small business owners and entrepreneurs an accelerated turnaround time for SBA underwriting review.  A response to an SBA express loan will be turned around within 36 hours.

Community Express – This loan allows for government guaranteed banks and lending institutions to offer a unique but extremely valuable combination of financial and technical assistance to small businesses that are located in under-served areas of the United States.  These loans are $25,000 or less and are meant for individuals that are looking to start a business.

Patriot Express – This loan program is dedicated to small businesses that are 51% or more owned by United States veterans or current military members.

SBA 7(a) Export loan Programs
These loan programs are dedicated to US small businesses that export products over seas.  70% of small business in the US that export products have less then 20 employees.

Export Express – This loan program helps small businesses start or grow their export efforts within the United States.  These loans or lines of credit are capped at $250,000.  The underwriting guidelines for this loan are decided by each bank or lending institution.

Export Working Capital Program – This loan program is for small businesses that have the capacity to grow their export markets and need additional capital to do so.  Interest rates and underwriting guidelines are determined by the SBA lender.

International Trade Program – This loan program is for small businesses that are looking to start or continue exporting but have been directly affected by imports.  The funds from this loan must put the small business in a position to better compete in the exporting markets.  This loan program caps at $1.75 million.

Rural Lender Advantage Loan Program
This program is more for lenders then it is borrowers.  This program assists small community SBA lenders to streamline the unique application process of small rural community areas within the US.  This program is apart of a larger initiative to promote economic growth in smaller rural communities with a focus on communities that have suffered high unemployment, natural disasters and other natural and economic conditions.

Special Purpose Loan Programs
The SBA has a few different special loan programs for small businesses that have been affected by NAFTA, to provide financial support to employee stock ownership plans, and to help assist with population control.

CAIP - The Community Adjustment and Investment Program loans are for US companies to pay SBA loan fees.  Certain SBA loan fees depending on the loan amount can be quite large.  These loans help pay for those fees.

CAPLines – CAPLines is an umbrella program that helps small businesses meet their short-term and cyclical working-capital needs.

Employee Trusts – This program is dedicated to the financial assistance to Employee Stock Ownership Plans.

Pollution Control – These loans are 100% dedicated to small businesses that have to deal with pollution waist.

SBA 504 Loan Program

The SBA 504 loan program is one of the SBA’s more popular small business loans for small businesses that are looking to purchase major fixed assets such as land, commercial property, or major equipment.  These SBA loans are long term fixed rate loans offered by Certified Development Companies (CDC’s).  A CDC is a private non-profit organization that is dedicated to the economic development of it’s community.  CDC’s work with the SBA and private small business loan lenders to provide financing for small business. 

SBA 504 loans are not for working capital but for fixed asset projects such as property, commercial real-estate, and major equipment

In order for a small business to be approved for an SBA 504 loan you must be able to prove to the CDC’s, SBA and SBA qualified lender that you are a low risk small business borrower.  To be a low risk small business borrower you must have a good business credit score with the three main business credit reporting agencies, a professionally written SBA certified business plan, and a business loan application with proper financials.  With all three of these, being approved for an SBA loan is going to be extremely tough.

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How SBA 504 Loan Funds May be Used
The money you will receive from be approved for a SBA 504 loan can be used in three main ways:

 - Purchasing land, improvements to land, commercial buildings, streets, parking garages, and utilities.
 - Construction of new facilities or the modernization of existing facilities.
 - Purchasing long-term machinery or equipment.

SBA 504 loan funds cannot be used for working capital, refinancing purposes, or paying off debt.

Eligibility
In order to eligible to be approved for an SBA 504 loan your business must be a for profit business and fall within the size limits created by the SBA.  Based on the SBA guidelines, a small business is qualified as small if it has a tangible net worth of less then $7.5 million and does not have a average net income in excess of $2.5 million after taxes for the processing two years.  These loans cannot be made to businesses that are looking to have investment or rental properties.

Interest Rates and Fees
SBA 504 loan interest rates are based on what each CDC lender underwriting guidelines are.  They are usually pegged above the standard market business loan rates for 5 and 10 years US Treasury issues.  Fee’s are a total of 3% of the debenture and if approved may be financed within the loan.

Minority SBA Loans

There is a common mis-perception that minority loans are not profitable for small business loan lenders.  This is 100% not true.  According to the Kauffman foundation, minority small business loans can be very successful for lending institutions with am average net return of $1 million dollars per investment.  Along with women business owners, minority owned small businesses are the largest growing sector is the United States.

Minority owned small businesses are one the of the largest growing sectors in the United States

Many government and private associations put funds aside each year for funding minority owned small businesses.  The Minority Business Development Agency (MBDA) is the only government agency 100% dedicated to the growth and success of minority owned small businesses.  The MBDA provides funds to a network of Minority Business Development Centers (MBDC’s), Native American Business Development Centers (NABDC’s), and Business resource Centers (BRC’s).  All of these centers have a focus of consulting minority owned business owners in the areas of business plan writing, financial planning, technical assistance, growth marketing, and entrepreneurship so they can one day become fund-able small businesses.

The Small Business Administration (SBA) does not offer grants to start or grow a small business however, they do guarantee loans up to $250,000 dollars.  You can visit one of your local SBA offices to find out what you need to be approved for an SBA loan.  SBA loan requirements are pretty strict and require that you have a good business credit score with all three business credit reporting agencies, have a professionally written business plan, and a business loan application with proper financials.  Without these items it is going to be quite difficult to prove to a lender that you are a low risk small business borrower.

Get started building your three business credit scores

Let a professional SBA certified business plan writer create your business plan

Wells Fargo and Bank of America have been known to be the nations top minority small business loan lenders.  Before you do anything try to visit one of your local Wells Fargo or Bank of America’s and see what their guidelines are to be approved for a minority SBA loan.

Lastly, another good funding resource for minority owned businesses are the small business investment companies (SBIC’s).  These are privately owned companies monitored by the SBA and offer venture capital and debt financing solutions for minority owned small businesses.

How to Get $250,000 in Business Credit for Your EIN That’s Not Linked to Your SSN

During this 70 minute live-training you’ll discover how to build credit that’s linked to your EIN and not your SSN that requires no personal guarantee or credit check… and how to get business loans and credit lines even if you have personal credit issues, no collateral, or are just starting your business.

You’ll uncover…

What business credit really is… and how it can be obtained linked only to your EIN with no personal credit check or personal guarantee required for approval

How to get real vendor credit you’ll want and can use immediately after the training using your EIN… and how to get HIGH-LIMIT store credit cards within 90 days or less at most major stores

How to get started today and quickly build a business credit profile and score that you can use to fund your business with credit cards, loans, and credit lines

How you can get very high-limit CASH, Visa and MasterCard business credit cards… per SBA limits on these cards are typically 10-100 times higher than consumer limits

A look at actual business credit approvals similar to what YOU can get approved for quickly… see for yourself real approvals for $8,000, $10,000, $15,000, even multiple with $50,000 approvals that you can also get approved for following the steps in this webinar

5 things you must do to initially start a business credit profile and score… and how you can get business credit even if you are just starting your company and even if it’s out of your home.

Which business entity you should obtain to truly eliminate your personal liability… so you don’t expose your personal assets and keep you and your family’s finances safe and secure

How to fill out your credit and funding applications the RIGHT WAY… so you’ll meet credit issuer approval standards before you even apply to get immediate automated approvals

3 BIG mistakes people make that get them denied for credit when they apply… and how you can avoid these pitfalls to get approved

3 ways to get funding that your bank does NOT offer and will NOT tell you about… and how to get approved as a startup, with no collateral, or even if you have personal credit issues

How banks have their own credit score for your business… and how to easily get a top bank credit score to make you a HIGHLY lendable candidate so you can get low rate loans and credit lines

How to get access to business credit, loans, and credit lines when you need them at the best rates possible… and how to do so with concierge service from top business advisors and finance officers

How you can make money offering business credit and financing as a service… as well as getting money and credit for your business.

And much more

During this one show you’ll get every detail you need to build your business credit and get loans and credit lines for your business.

Whether you are just getting started in business, have no collateral, lack cash flow, or are established and looking for the most money and credit at the best terms… this special one-of-a-kind webinar is for you!

Do you want to make money offering business credit and financing? Check out this link to discover how you can earn big commissions offering business credit and financing services for your customers

Your Business Fundability

Many business owners make the terrible mistake of thinking that just because they are in business, they deserve a business loan or line of credit.  These business owners will start their business and then instantly try to go out and apply for business financing.  Little do they know their business isn't fundable and they are declined, destroying their personal credit score and any opportunity to be approved for business financing in the next several months.

There are several different aspects of creating a business so that it can be fundable in the short-term and in the long-term.  Many business owners have a skewed perception of what it means to be fundable.  Let's look at some of the items that are needed for your business to be fundable.

Lender Compliant
Lenders are going to review a 20 item checklist to make sure that before they even look at your loan application, your business has a solid corporate foundation.  Your corporate foundation consists of your legal business name, proper business phone number, proper business address, state legal filings, and 16 other compliance items.  Lenders pretty much want to see that you have taken the time to pay attention to the details.

Strong Business Credit Scores
Your business credit score is just like your personal credit score.  If you do not have a good personal credit score you will not be able to buy a house, a car, or anything else that requires a good personal credit score for financing.  Your business credit score works the same way.  If you do not have a good business credit score with all three business credit reporting agencies, you will most definitely be declined for unsecured business financing.

Business Credit Diversity
Banks and lending institutions want to see that you have a diverse credit profile.  Again, just like your personal credit score, your business credit score goes up if you have a combination of reporting business credit cards and reporting vendor lines of credit.  If you only have one business credit card and nothing else, a bank or lender will be a bit more hesitant to approve your business for unsecured financing.

Business Credability
Having a strong business credit foundation is one aspect to becoming business fundable, however, being business credable is a different ball game.  Business credability is how you present your business to a potential lender or investor.  This will tell them whether or not you have a business plan that will entertain debt financing.  This has quite a bit to do with your business plan, your executive summary and your financial documents.  Ask yourself one question, "Would you lend You money?"

What You Need to Do Before Applying for Commercial Mortgages

When a business owner decided to apply for a commercial mortgage, it’s a big step forward in the life of the company. Most of the times, business owners are look for commercial mortgages because they have projected business expansion or they need to develop the property for other purposes. Most likely, these developments are related to their current business. Unfortunately in many cases, the forecasted expansion or development cannot be accommodated by their existing business location.

Compared to residential mortgages, there is more paperwork required in commercial mortgages. With this in mind, a business owner will need two important people throughout the process. First is a lawyer for legal concerns regarding the property and second is a commercial mortgage lender for fulfillment and processing of the application. A commercial mortgage lender can help with finding a lawyer that specializes in commercial property.

SBA Small Business Loan Lenders

SBA loans are small business loans given out by certain approved banks backed by the Small Business Administration (SBA). The SBA is a government agency funded by the US Treasury. Many small business owners believe that the government is the one that directly lends to small business owners. This is no longer to be true. In the past, the SBA directly issued business loans to small businesses. The SBA then pushed this responsibility to America’s qualified banking institutions.  

If a small business is seeking an SBA loan, the certified SBA lender will request a loan guarantee from the SBA.  The SBA will approve or decline this request.  If the SBA approves the request, depending on the SBA loan program , the SBA will guarantee repayment of that loan up to a certain percentage of the loan if the small business owner defaults on the loan.  In order for a bank to offer SBA loans as apart of their loan program, they must go through certain qualifications. Once the bank is a certified SBA lender, they have the write to offer all of the SBA’s loan programs.

The SBA (The Federal Government) does not directly lend to small businesses

There are different types of SBA loans in order to entertain the different small business scenarios in the United States. The SBA has also created SBA loan programs to entertain natural disasters, economic disasters, and small business owners who are experiencing financial stress.  In order to be approved for these types of government backed loans, you must fall under all the certified SBA lenders qualifications.  SBA loans take between four and six months to process.  There are quite a few qualifications a small business must go through in order to be approved for an SBA loan.  These government backed loans are not for small businesses who are in current real-time need of business capital.

Minority SBA Loans
SBA Loan Rates
SBA Loan Requirements
SBA Loans for Women

The SBA has offices all over the country in order to assist local small businesses on their needs.  Search for an SBA office nearest you.

Below are the different types of SBA loan programs backed by the SBA.

SBA 504 Loan Program– This loan program is mainly for commercial mortgages.  If you are looking to purchase a building you can apply for an SBA loan to assist you in the purchase.

SBA 7(a) Loan Program- This loan program is actually a bunch of different loan programs for different business purposes.  The SBA 7(a) program is the SBA’s most flexible loan program and is mainly for start-ups and existing businesses.  Please see the different SBA &9a) loan programs below:

7(a) Express Loan Programs

SBA Express – This allows for a borrower to have a response of their application within 36 hours.  There are quite a few qualifications to even apply for this type of accelerated loan program.

Community Express – This program serves the under deserved communities in certain areas in the US or HUBZones with a unique loan that covers cash and technical assistance.  This program also entertains loans of up to $25,000 no matter where your small business is located in the United States.

Patriot Express – This program assists small businesses that are 51% or more owned my veterans or anyone in the military.

7(a) Export Loan Program

Export Express – This programs assists business owners in their exports business.  The SBA offers backing for loans and lines of credit up to $250,000.

Export Working Capital – Allows for small businesses that can support export sales to do so with the assistance of a Export Working Capital SBA Loan.

International Trade Loan Program – Program assists in businesses that are looking to start or already export or have been affected by import competition.  The funds must put the small business in a position where they can compete.  This loan is caped at $1.75 million.

7(a) Rural Lender Advantage Program

Rural Lender Advantage - Program is designed to assist small rural area lenders that have been negatively impacted by anything to streamline application process.  This is apart of a larger SBA initiative.

7(a) Special Purpose Loan Program

CAIP – The Community Adjustment and Investment Program is dedicated to assist US companies that are doing business in areas of the country that have been affected by NAFTA.  CAIP loans allow for the payment of SBA loan fees to lenders.  In many cases these fees can be very large.

CAPLines – This program is an umbrella program and assists small businesses meet their cyclical working capital needs.  This loan features five different lines of credit:  Seasonal Line, Contract Line, Builders Line, Standard Asset Based Line, and Small Asset Based Line.

Employee Trusts – This program assists in employee stock ownership plans.

Pollution Control – This program allows for different 7(a) loans for the main purpose of pollution control.

SBA Micro Loan Program – This loan program is dedicated for start-ups and caps at $35,000.  Main purpose of this loan program is for working capital to buy equipment, inventory, etc.

SBA Disaster Assistance Loan Program – This program offers low interest loans to any business property or assets that have been destroyed in a natural disaster.

Small Business Start-Up Financing - How to Get Up to $150,000 to Start Your First Business

Believe it or not, one of the best places to get financing to open your first business is a bank. While banks are incredibly strict when lending money to first time business owners, there is a special loan program that helps them to loosen up their lending requirements. That program is called the SBA (Small Business Administration) 7(a) Loan program.

The 7(a) loan program can be used in many different ways by many types of businesses. The focus of this article will be using the 7(a) loan program to secure up to $150,000 in financing to start your first business.

The SBA 7(a) program works like this:

• The SBA agrees to guarantee a large portion of a loan made by a bank to a first time business owner, granted the bank follows specific guidelines when approving the loan.
• The guarantee means that if the loan goes bad, the SBA will write a check to the bank for the guaranteed portion of the loan.
• The effect of the SBA guarantee is that it greatly reduces a bank's risk and the bank will be much less strict with its lending guidelines.

So the SBA gives anybody looking to open their first business a shot at getting a bank loan to help with start-up costs. That's the easy part to understand. While a bank will loosen up its lending requirements with an SBA guarantee, it can still be hard to get approved. There are several things you need to know if you if you decided to pursue this type of financing.

1. First, you've got to have a solid Business Plan. This is what the bank will rely on heavily to determine if you know what you're doing. A solid Business Plan and Income/Expense projections will go a long way towards getting your loan request approved.
2. Second, you've got to have some business experience either directly or related to the business you are trying to open. If you don't, you'll have a hard time getting an approval.
3. Third is cash. You'll need to provide 30% of the total cost of starting your business in cash. So if you determine that you need $100,000 to start your business, you'll have to come up with $30,000 of your own cash to invest in the business.
4. Fourth, strong personal credit is a must. The better your credit scores, the better your chances of getting approved. If your credit scores are less than 650 or you have a bankruptcy you' ll have to seek other avenues to get the financing you need.

That's it in a nutshell. If you have all of these things covered you stand a decent chance of getting approved for a 7(a) loan to open your first business.

Getting Started With a Loan From the Small Business Administration

What it is: These are U.S. government-backed term loans that are available at most banks and commercial lending institutions In any given year, the SBA can guarantee tens of billions of dollars-worth of loans that support tens of thousands of small businesses.

The SBA’s primary lending program -- the 7(a) Loan Program -- guarantees as much as 85 percent of loans up to $150,000 and 75 percent of loans of more than $150,000. The maximum loan amount is $5 million.

Loan terms can last up to 25 years for real estate, up to 10 years for equipment (as long as the equipment is likely to stay useful during that time) and usually up to seven years for working capital. Interest rates are also competitive because the SBA limits the interest rate spread that banks are able to offer on the loans.

Upside: The SBA guarantee gives banks some comfort room to approve loans or allow borrowers to repay loans over a longer period of time. You might want to consider an SBA loan if you are looking for a loan with a longer term and lower payments -- or have loan application barriers related to inadequate collateral or limited operating history.

Downside: Even though the SBA has tried to make it better, the time-consuming paperwork and red tape surrounding SBA loans is legendary. You might move mountains and still not prove that you have the cash flow required for a 7(a). One potential solution might be to find a bank participating in the SBA Express program, which promises a 36-hour turnaround in return for only guaranteeing half of a loan’s value. The maximum loan amount of $350,000 is also a fraction of the 7(a).

How to get it: Large U.S. banks such as San Francisco-based Wells Fargo and Minneapolis-based U.S. Bank are also some of the most active SBA lenders.

However, it might be worth it to check out local community banks with a focus on business lending. Such banks are a good bet in general for businesses financing because they have more leeway when it comes to approving loans, and their officers can be a wellspring of business financing advice.

Related: How Community Banks Are Wooing Small-Business Customers

Want to find a bank with a niche in SBA lending? You can find out which area banks have the highest SBA loan volume by doing a search on the SBA website.

While shopping around among banks, ask them if they belong to the SBA’s Preferred Lenders Program, in which the SBA delegates much of the decision making and loan servicing to banks that have shown themselves proficient in processing SBA-guaranteed loans. Such banks will have more SBA loan expertise, and should hopefully be able to better navigate the paperwork with you.

Related: A Cluster of Clusters: Where the SBA Is Investing in Regional Economies

While 7(a) is the SBA’s primary loan program, the agency supports other types of small business financing:

The CDC/504 Program provides long-term, fixed-rate financing for businesses acquiring new facilities or modernizing existing locations. The SBA designates particular nonprofits as Certified Development Companies (CDCs) that are able to provide CDC/504 loans -- entirely guaranteed by the SBA -- for 40 percent of project costs. The limit on the SBA’s portion is $5 million. Private sector lenders finance half of the cost of the project, with the business kicking in 10 percent out of pocket.