Grow your business affordably
SBA Loans – Small Business Administration
A loan from the U.S. Small Business Administration is the smartest and most affordable way to obtain financing for your small business. SBA loans are partially guaranteed by the federal agency, which allows lenders to offer you flexible terms and low-interest rates.
Read on to find out if your business qualifies for an SBA 7a or a 504 loan.
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What is an SBA loan?
A small business loan backed by the U.S Small Business Administration is the most affordable way to finance your business. With flexible terms and low-interest rates that are accessible to American business owners and entrepreneurs who have well-established businesses with strong credit history.
An SBA loan is a form of conventional financing that has very stringent requirements, which are partially guaranteed by the U.S. Small Business Administration, and are issued by authorized lenders such as GoKapital.
With these government-backed loan programs, the Small Business Administration is helping entrepreneurs, veterans, women, and minorities get easy access to lending opportunities by offering banks and private lenders a partial repayment in case the businesses defaults on their payments. Therefore, reducing the risk for lenders translates into flexible terms, low annual percentage rates (APR), low-interest, and low down payments for borrowers.
It is important to remember that the Small Business Administration doesn’t lend money directly to small business owners, instead, it sets guidelines for loans made by its partnering lenders.
SBA Loan Programs
There are different types of SBA funding programs for business owners. Deciding which one is right for you, will depend on the goals and needs of your business, its size, and the time operating.
The only two loan programs that are available through GoKapital are the 7(a) and the 504. If you’re looking for other types of SBA financing programs, visit the Small Business Administration’s website by clicking any of the links below.
SBA 7a Loan
The 7(a) is the most popular loan program. The loan amounts on the 7A program could go up to $5 million. Business owners love it for its long terms and flexibility, and because you can use it to alleviate most of the business necessities—making the loans more manageable for borrowers.
The Small Business Administration 7(a) loan could be used to purchase or lease equipment and machinery, inject working capital into your business, refinance existing debt, purchase an existing business, purchase furniture, construction & remodeling, acquiring real estate, fulfill seasonal inventory demands, and much more.
- Up to $5,000,000
- Funding time: 30-60 days
- Lowest interest rates (5%-9%)
- Long repayment terms (3-25 years)
- Great for Businesses that need working capital
- Funds could be used for general business purposes
- The most affordable way to obtain financing for your business
- Credit Score (FICO): Above 680
- No recent bankruptcies, tax liens, or foreclosures
- Collateral might be required if the loans are above $25,000
- The business must be physically located in the United States
SBA CDC/504 Loan Program
The Certified Development Company (CDC) loan was designed for businesses that wish to purchase fixed assets for expansion or modernization such as business equipment, machinery, furniture, or commercial real estate. It requires a low down payment (Starting at 10%) and provides fixed interest rates with long repayment periods.
CDC/504 loans are popular among businesses that are planning to buy or build owner-occupied commercial properties. However, these businesses have to occupy at least 51 percent of the commercial building.
SBA 504 Loan Features
- Loan Amounts: Up to $10,000,000
- Terms: 10-20 years
- Funding time: 30-60 days
- CDC/SBA 40%
- Borrower 10%
- Bank 50%
SBA 504 Loan Requirements
- Business must have a net worth of less than $15 Million
- Business must have an average net income less than $5 million after taxes for the preceding two years.
If you’re not sure which loan program is right for you, GoKapital can help. Talk to one of our specialists, and he or she will evaluate your business’ needs, explain the pros and cons of each program, and help you decide which program is right for you. And if your business is still not yet eligible for SBA funding, we will be honored to work together until we secure the much-needed financing.
In order to expedite the process, you should have certain documents ready before applying for a loan.
Here’s just some of what you’ll need to apply for a small business administration loan:
How can I get an SBA-guaranteed loan?
Gokapital has streamlined the application process for all kinds of funding. Loans secured by the Small Business Administration, however, have a higher threshold for approval than other types of funding. You must be in business for at least two years and be a U.S. citizen or legal permanent resident. Not every kind of business is eligible; check the Small Business Administration’s requirement list before you apply. You must have no bankruptcies in the last three years and no defaults on government-backed loans. Most importantly, your financial statements must show that your cash flow will support the loan’s repayment.
How can I use the funds?
You can use the proceeds of the loan for short- or long-term working capital, including seasonal financing, construction financing, and inventory. You can also use it to buy equipment or real estate or to renovate existing real estate.
- Credit Score: 680+
- Time in Business: 2 years
- Annual Revenue: $500,000
- Profitability on Tax Returns: 15% – 30%
- Credit History: No recent bankruptcies, charge-offs or settlements
- Overdrafts and Negative Days: Less than 5 per year