Lost on the Financing Quest? How to Navigate SBA Loans

You’ve got big plans for your small business; plans that require capital as well as financial guidance. Although you could go the conventional route for financing your vision, you may find different options, different benefits and different types of support through a U.S. Small Business Administration loan.

One of the main responsibilities of the U.S. Small Business Administration, or SBA, is to provide small businesses lending assistance, such as SBA loans. This type of assistance strengthens the small business sector and helps introduce innovative products and services to the marketplace.

sba loans
photo credit: Victor1558

SBA loans are structured to specifically meet the needs of small businesses, with features that usually result in lower monthly payments, helping business owners preserve cash flow. With lower payments, SBA loans provide businesses the opportunity to create jobs, grow and expand and more easily manage day-to-day cash needs.

SBA loans offer additional benefits compared to conventional financing options, including:

  • Up to 25-year terms, with no balloon payments.
  • Fixed or variable interest rates up to 25 years.
  • As little as 10 percent down payment on commercial real estate.
  • Loan closing costs that may be financed.1
  • Less stringent collateral requirements.

To qualify for SBA lending, your business must meet specific criteria:

  • Operate for profit.
  • Operate in the United States or its territories.
  • Not exceed $15 million in maximum tangible net worth and a two-year average net-income (after federal income tax) of $5 million.
  • Show that the loan can be repaid from existing cash flow.
  • Meet the SBA credit underwriting guidelines of the financial institution handling the loan.

While the SBA sets the guidelines for lending, SBA preferred lenders, like Fifth Third Bank, offer the financing to small businesses and many times have SBA specialists available to help you navigate the SBA lending process. Your SBA specialist also can provide the resources and guidance to help you determine what SBA loan option is right for you.

There are several SBA loan options to meet varying business needs, including:

  • SBA (7A): This is the most popular SBA loan for starting, acquiring or expanding a business or refinancing existing debt. Loan proceeds may be used for working capital, equipment and commercial owner-occupied real estate. Loans are available up to $5 million.
  • SBA Express: Similar to the SBA (7A) loan, SBA Express offers smaller loans, up to $350,000, with a simpler application process and faster approval.
  • SBA 504: This is a loan designed to help small businesses acquire fixed assets such as commercial real estate or equipment. Loan sizes are usually between $125,000 and $10 million or more. There is a job creation requirement for this type of loan.
  • Other SBA: Unique SBA loans are available for businesses that want to begin or expand exporting into international markets. Bank SBA specialists can review the details of these options with you.

While the SBA loan application process – with its many lending options and a fair amount of paperwork – may seem difficult when you first begin the process, it really is no more difficult than other lending processes. Plus, you can utilize your Bank’s SBA specialist, who can provide professional, one-on-one guidance to help you complete your SBA loan application. In addition, SBA offers programs such as SCORE (Counselors to America’s Small Business) that can provide mentorship to entrepreneurs and business owners at no cost to you.

1 Other non-SBA fees may apply.

About the Author: David Jackson is the National SBA Director for Fifth Third Bank. Jackson oversees the Small Business Administration lending program and other government guaranteed lending programs throughout Fifth Third Bank by listening, understanding and sharing customers’ curiosity.www.53.com/curiosityatwork