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General Guidelines for SBA Loans

An Original Article from SBA.gov

Basics

  • Loans of $5,000 – $5,000,000
  • Most businesses eligible except real estate investment properties (rent homes, apartments) but they can buy real estate for their business to operate
  • Provides guaranty to lenders of 50-85% (90% export)
  • Maximum guaranty – $3.75 million
  • Guaranty fee varies from 2-3.5% but can be taken as an Oklahoma tax credit
  • Interest rates vary and are set by lender with caps mandated by SBA

Eligible Use of Proceeds

  • Real Estate
  • Machinery & Equipment
  • Furniture & Fixtures
  • Inventory (except perishable products)
  • Accounts Receivable
  • Leasehold Improvements
  • Franchise Fees (not all eligible)

Take to the Lender (Start Up)

  • Business Plan
  • 3 years financial projections
  • 3 years tax returns for each owner of 20% or more

Key Factors to Evaluate for Approval

  • Cash Flow – Must support debt repayment
  • Management Ability – Education and experience in the industry
  • Credit – No score set by SBA, but everything needs to be current (bankruptcy may be okay if remote in time and reason beyond control of borrower)
  • Collateral – business assets first then personal real property
  • Equity Injection – Not required for existing business in most cases; new businesses SBA requires 10%, but lenders usually like 20% – possibly more or less depending on risk

Advantages of SBA vs. Commercial Loan

  • Can be under collateralized as long as all available collateral is pledged
  • Smaller equity injection
  • Longer loan Term
  • Technical Assistance (SCORE/SBDC/WBC)

Average turnaround time 3-5 days after lender submits to SBA