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