Small businesses have been dealing with many effects from the Coronavirus pandemic in ways that no one could ever imagine. Sadly, while many people were able to get their businesses to take off from their homes, others had their businesses sinking instead of taking off. Regardless of what’s happening with your business, you may be able to benefit from SBA loan opportunities. Whether your business is expanding and you need to get money to keep up, or your business is shrinking and you need money to handle expenses, there are opportunities available.
What are SBA Loans
The Small Business Administration (SBA) offers government-backed loans to small businesses. That means the government guarantees the loans made by lenders. While the lender would be the one to make the loan, the SBA would pay up to 85% of any loss in cases the borrower defaults.
More specifically, the 7(a) loan program has been super helpful to those in need of funding. In fact, there are a variety of different types of 7(a) loans! There are:
- Standard 7(a) Loans
- 7(a) Small Loans
- SBA Express Loans
- Export Express Financing
- Export Working Capital Loans
- International Trade Loans
- Preferred Lender Program (PLP)
- Veterans Advantage Loans
Standard 7(a) Loans
Just like the name says, this is the standard 7(a) loan option. These loans can allow small businesses to borrow up to $5 million. The interest rate can be negotiated between the lender and borrower but it cannot exceed the SBA maximum limit! Eligibility for these loans are determined by the SBA. However, qualifying lenders may be able to determine eligibility without SBA review if they have been granted delegated authority (PLP).
7(a) Small Loans
Unlike the Standard 7(a) Loan, this loan option only offers a maximum borrowing amount of $350,000. The interest rate can be negotiated between the lender and borrower but it cannot exceed the SBA maximum limit! Eligibility for these loans are determined by the SBA. However, qualifying lenders may be able to determine eligibility without SBA review if they have been granted delegated authority (PLP).
SBA Express Loans
When people think of government funding, they typically think the process is long and takes patience. However, SBA Express Loans provide a fast turnaround time! The SBA Express Program has the benefit of a quick response from the SBA. That means the SBA will respond to your application within 36 hours (that’s less than 2 days!). These loans provide more than 7(a) small loans because their maximum loan limit is $500,000. The interest rate can be negotiated between the lender and borrower but it cannot exceed the SBA maximum limit. Unlike the other loan options listed above, eligibility for these loans is only determined by the lender.
Export Express Financing
While the Export Express program may not be a loan per say, it is still a financing option. That’s because it provides exporters and lenders a streamlined way to get financing for both loans and lines of credit for up to $500,000. Since this is an express option, the SBA will respond within 24 hours! The interest rate can be negotiated between the lender and borrower but it cannot exceed the SBA maximum limit. Similarly to SBA Express Loans, eligibility for these loans is only determined by the lender.
Export Working Capital Loans
Businesses that have a lot of export sales may be able to benefit from this type of loan. Especially if they need additional working capital in order to support these kinds of sales. Just like the Standard 7(a) loan, these loans can allow borrowers to get up to $5 million. The interest rate can be negotiated between the lender and borrower. However, there is not a SBA maximum interest rate limit. Eligibility for these loans are determined by the SBA. However, qualifying lenders may be able to determine eligibility without SBA review if they have been granted authorization.
International Trade Loans
Businesses that are expanding due to their increasing number of export sales can benefit from this financing opportunity. Businesses can also benefit if they are dealing with the negative impact of imports and need to improve themselves through means like modernization in order to catch up to their foreign competition. These loans can be used as fixed assets towards needs like construction, equipment, real estate, and more. These loans can provide up to $5 million. The interest rate can be negotiated between the lender and borrower but it cannot exceed the SBA maximum limit. However, the eligibility decision is up to the SBA.
Preferred Lender Program (PLP)
This is not a loan option but it is still important to mention. The SBA will pick lenders to have more authority when it comes to processing SBA-backed loans under the Preferred Lenders Program (PLP). When lenders have this authorization they get more authority to service, process, close, and liquidate the SBA loans. If a lender wants to gain this status, they can ask a field office to see if they can become a preferred lender.
When the SBA considers lenders to become preferred, they want to see that the lender can:
- Process, close, service, and liquidate loans
- Develop and analyze loan packages from start to finish
- Meet SBA performance expectations
Veterans Advantage Loans
Many Veterans take the time they have out of the military to focus on other passions. That is why it should come as no surprise that they are veteran-owned small businesses. These businesses can benefit from Veterans Advantage loans because they have reduced fees! Eligibility for this loan option will depend on whether or not an individual that meets one of the following conditions owns at least 51% of the small business:
- Honorary discharged veteran
- Active Duty Military service member that qualifies for the Transition Assistance Program (TAP)
- Service-disabled veterans
- National Guard members
- Reservists
- Current spouse of any veteran, active duty service member, or National Guard member
- Widowed spouse of any service member that died in service or as a result of a service-related disability
How to Get an SBA-Backed Loan?
It’s easier than you may realize to get funding from the SBA. You can break down the process in four simple steps:
- Go the the SBA loan page to find the SBA loan that’s best for you
- Put in your Zip Code on Lender Match to find a lender near you
- Submit an application for a loan through a lender near you
- Wait for the lender to review your application and go from there
The SBA does provide direct loans. However, they are only available to businesses and homeowners that are recovering from a declared disaster. That means they are harder to qualify for since they can only help those that are dealing with a declared disaster which isn’t that common.
Benefits of an SBA-Backed Loan
There are some nice benefits that come along with an SBA-Backed loan. The three main ones are:
- Competitive Benefits
- Counseling and Education
- Unique Benefits and Terms
Bottom Line
The SBA has a variety of different options available for small businesses to consider when they need financing. Not every loan option is right for every business. That is why you should review your options before making a decision! Some options that you can consider are:
- Standard 7(a) Loans
- 7(a) Small Loans
- SBA Express Loans
- Export Express Financing
- Export Working Capital Loans
- International Trade Loans
- Veterans Advantage Loans
These loans can help businesses that are small or large. The funds from these loans can be used towards different expenses like long-term fixed assets, operating capital, and more. However, each loan program will have their own rules around restrictions and guidelines on the funds that you receive. That’s why it is important to confirm with an SBA-approved lender when reviewing your loan options! They can make sure the loan you apply for is right for the needs of your business. Take your time when reviewing your options.
