SBA Startup LoansVital and Surprising Facts About SBA Startup Loans… including how to get up to 5 Million in Financing for Your Startup Business.

SBA loans are government-guaranteed financing programs with capped interest rates and fees. There are short-term working capital and long-term financing programs available to businesses that qualify.  SBA loans are issued exclusively to small business owners by SBA-approved lenders.

There are a number of SBA loan programs with differing requirements and terms.

These loans lower the risks lenders face when extending credit to small business owners. If a borrower defaults on their loan, the Small Business Administration will reimburse the lender for up to 85% of the loan amount.

As a result, participating creditors will consider a larger pool of applicants and can offer more competitive terms. This translates into greater access to long-term financing, lower interest rates, longer repayment periods and affordable SBA loan payments.

Unless a loan is for disaster funding, the SBA does not actually provide the loan. Rather, an approved SBA lender or Certified Development Company does so.

The Community Advantage Loan program is a smart choice for startup financing.

Currently, SBA Community Advantage Loans are a pilot program which is a part of the SBA’s 7(a) loan program. SBA pilot loan programs operate for a limited time, unless they are extended or made a permanent part of the SBA’s loan programs.

Unless this program is renewed, it is set to expire on September 30, 2024.

In this program, community-based lenders meet the credit, management, and technical assistance needs of small businesses in underserved markets.

Get a loan for up to $350,000 with the SBA guaranteeing 85% of loans up to $150,000, 75% for loans greater than $150,000, and 90% for International Trade loans.

For loans of $50,000 or less, pay a maximum interest rate of Wall Street Journal (WSJ) Prime + 6.5%. For loans that are greater than $50,000, up to and including $250,000, pay up to the WSJ Prime + 6%. And for loans that are greater than $250,000 up to and including $350,000, you pay no more than the WSJ Prime + 4.5%.

Lenders in this program must maintain at least 60% of their SBA loan portfolio in underserved markets, which are:

Businesses located in:

These requirements make Community Advantage Loans a natural for startups!

This is the SBA’s most common loan program. It includes financial help for small businesses with special requirements. It is the best option when real estate is part of a business purchase, but you can also use it for:

The maximum loan amount 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.

As a part of a 7(a) loan package, you’ll need to gather appropriate documents before the lender will submit it to SBA. These documents include:

• SBA Form 1919 (the Borrower information form)

• SBA Form 413 (Personal financial statement).This form helps the SBA and other stakeholders assess eligibility.

• Business financial statements: Submit these to help show your ability to repay a loan:

• Profit and loss statement – Current within 180 days of application. Also include supplementary schedules from the last three fiscal years.

• Projected financial statements – Include a detailed, one-year projection of income and finances. Explain how you expect to achieve this projection.

• Ownership and affiliations: Provide a list of names and addresses of any subsidiaries and affiliates, including concerns, in which you hold a controlling interest or that are otherwise connected to you.

• Business license or certificate

• Loan application history (records of any loans you may have applied for in the past)

• Signed personal and business federal income tax returns of your business’ principal owners/stakeholders for the previous three years

• Include personal resumes for each principal

• Business overview and history with its challenges. Include an explanation of why you need the SBA loan and how it will help your business.

• Business lease, or a note from your landlord, with the terms of any proposed lease.

The CDC/504 Loan Program provides long-term, fixed rate financing of up to $5 million for major fixed assets to promote business growth and job creation.

504 loans are available through Certified Development Companies (CDCs). These are the SBA's community-based partners. CDCs regulate nonprofits and promote economic development within their communities. They are certified and regulated by SBA.

A 504 loan can be used for a range of assets that help promote business growth and job creation. These include the purchase or construction of: 

• Existing buildings or land 

• New facilities 

• Long-term machinery and equipment

Or use it for the improvement or modernization of: 

• Land, streets, utilities, parking lots and landscaping 

• Existing facilities 

However, you cannot use a 504 loan for: 

• Working capital or inventory 

• Consolidating, repaying or refinancing debt 

• Speculation or investment in rental real estate

If you have suffered substantial economic injury and are one of the following types of businesses located in a declared disaster area, you may be eligible for an SBA EIDL:

• Small business

• Small agricultural cooperative

• Most private nonprofit organizations

Substantial economic injury means your business cannot meet its obligations and pay its ordinary and necessary operating expenses. The EIDL provides the necessary working capital to help small businesses impacted by a disaster survive until normal operations can resume.  

However, EIDL assistance is available only to small businesses when the SBA determines they cannot obtain credit elsewhere.

The SBA can provide up to $2 million to help meet financial obligations and operating expenses that could have been met had the disaster not occurred. 

The interest rate will not exceed 4% for these loans. There is a maturity date of up to 30 years, with repayment terms determined by your ability to repay the loan. There are no prepayment penalties or fees.

The SBA provides loans to help eligible small businesses with their operating expenses when a member of the armed forces reserves is deployed to active duty. However, if your business has the financial capacity to fund its own recovery, you are not eligible for MREIDL assistance. 

Federal law requires SBA to first determine if the credit necessary to accomplish full recovery is available from non-government sources without creating an undue financial hardship. 

The filing period begins on the date the essential employee receives a notice of expected call-up. It ends one year after the essential employee is discharged or released from active duty.

• The highest Military Reservist Economic Injury Disaster Loan (MREIDL) amount is $2 million.

• If your business is a major source of employment for the area, the SBA has the authority to waive the $2 million statutory limit.

The interest rate will not exceed 4% for these loans. These loans have a maturity date of up to 30 years, although repayment terms are determined by ability to repay the loan. There are no prepayment penalties or fees

Lender Match is a program helping entrepreneurs match with potential lenders offering SBA-backed funding.

When working with Lender Match, the SBA advises business owners to prepare a business plan, determine the amount of funds necessary and their usage, and prepare financial projections. While it is not necessary to prove industry experience, it is helpful. You should also consider what you may have available for collateral if the lender requires it.