There is probably no loan that is more desired in the small business community than the SBA loan, likely due to the fact that it is a long-term loan that can be used for almost anything. Plus, the rates and terms are so great, you’d have a hard time finding a better option.
Since this loan is backed by the SBA, the lenders are not taking as big of a risk, which means that they are able to offer loans to small businesses that wouldn’t be able to qualify otherwise.
In this article, we will outline what makes an SBA loan so desirable and who is most likely to qualify for this funding.
Why so Desirable?
These loans are available in a variety of sizes, from $5,000 to $5 million. The interest rates are typically lower than the typical traditional loan, which ranges from 7% to 30%. The payment terms are usually more stretched out than traditional loans.
SBA Loan Qualifications
An SBA loan typically ranges between 5 and 25 years. While it’s true that these loans are offered to provide small business owners with access to funding, there’s still a lot of competition.
Typically, the business must be able to cover the SBA loan and any other debt with the cash flow of the business. Each application is evaluated on a case-by-case basis, but the following is some of the basic criteria that are expected:
Two years in business
620+ credit score
$100,000+ annual revenue
Additionally, experience in management and the borrower’s credit history will be considered- but you do not necessarily need a strong borrowing history. The main thing is to demonstrate that the business has enough cash flow to pay the note on the loan along with any other debt obligations.
In addition to the application, you must also submit additional documentation, depending upon the SBA loan you are applying for, including:
Business plan
Tax returns (personal and business)
Profit/loss statements
Bank statements
Balance sheet
SBA loans are highly desirable for small business start-ups and expansions- which means they are also highly competitive. Contact Porter Capital Group for more information on getting an SBA loan for your small business.