Types of SBA Loans for COVID-19 Relief
SBA loans for COVENT-19 eligibility are divided by lender into the following types:
Housing:
SBA 7(a) financing is the only "single sector housing" category for commercial properties.
SBA 504 financing is a "multi-sector housing" financing category and may be used on properties that provide affordable housing for lower income families.
Afa7 financing is the only "bridge financing" category available for expansion of an existing business.
Utility:
- SBA 7(k) financing is the only "single sector utility" category
- Afa9 financing is the only "multi-sector utility" category available
Railroad:
SBA 7(o) financing is the "Single Rail" category exclusively for Southeastern Pennsylvania Transportation Authority metro areas.
SBA 504 loan funds must be used for single and multi-sector transportation projects. The 504 Program may also fund "green" projects such as rail, mass transit, bicycles and pedestrian infrastructure.
Construction and Industrial:
SBA 504 loans can be used to finance the purchase and/or installation of office equipment, manufacturing equipment, and machinery. They can also fund alterations, renovations and information technology upgrades.
Broad categories of SBIR loans include:
SBIR/STTR: Small Business Innovation Research – The SBIR program is aimed at funding early stage innovation.
6 Types of SBA Loans & Programs
For investors looking to get a loan for their real estate investment, the SBA offers a number of loan programs that provide competitive rates. While these programs include different requirements for qualifying, all are designed to provide loans for areas where conventional lending institutions have traditionally declined to make loan.
Among the various types of SBA loans, fixed rate loans are those that have a fixed interest rate for the life of the loan. On the other hand, a floating rate loan will change from month to month dependent on the fluctuations of the prevailing interest rate market.
Additionally, some loan products have guarantees, paired with an SBA guarantee. This is a guarantee from the Small Business Administration that protects the lender in the event that the borrower fails to meet the terms of the loan. The SBA guarantee protects the lender from any financial loss.
Here’s a summary of the six most common SBA loan products and programs:
Section 504 Programs: Loans for new and expanding businesses
With SBA loan programs, you can finance a new business or expand an existing business. These loans can also be used to buy special purpose real estate. Many of these loans have hard and soft funding caps on the amount of loan you can get to ensure that larger projects are not financed with the use of these loans.
SBA 7(a) Loans
One of the most popular SBA loans is the 7 (a) loan. These loans are great opportunities for small businesses that have strong equity and excellent risk evaluations. They are used primarily to help communities rebuild, improve, and revitalize small businesses within a distressed local area.
While these loans provide much needed capital for local businesses and are a fitting choice for many applicants, they are by no means the only option. SBA loans are broken down into four categories – for farmers, for businesses that do not meet the eligibility requirements for a conventional loan, to support specific business activities, and for certain businesses in rural areas.
To qualify for a 7 (a) loan, the business must meet the eligibility requirements and have a loan closing date within 60 days.
Early SBA 7 (a) Loan Interest Rates
Interest rates for SBA 7(a) loans are based on the interest rates that private loan providers would offer the borrower. The Higher Education Act of 1965 was passed in an effort to expand the availability of education opportunities to students in the U.S. This legislation established the U.S. Department of Education, which is the agency responsible for allocating funds to eligible institutions.
SBA 7(a) Loans at a Glance
A 7(a) loan is an unsecured loan, which means that you don’t have to provide collateral in exchange for the loan. 7(a) loans differ from other business loans because they are available for businesses with average and poor credit histories. SBA loans are also available in a variety of sizes.
Before you take out a SBA loan you have to complete an application. The application form requires business owners to provide detailed information on the business’s type of business, location, products and services provided, and more.
With the application form comes two other criteria … a minimum 200% down payment on the loan and a minimum three personal assets at risk (PALs).
If you meet the minimum application standards, the SBA forwards your application to a group called a Finance Committee (FC). The FC reviews applications to ensure they meet the terms of the program and approve loans.
A 7(a) loan is a good option for small businesses without a long credit history. These types of loans are often for businesses with low credit scores or no credit history. Businesses that meet the terms may be eligible to receive up to 70% of the loan amount as a direct loan from the SBA. The remainder of the loan would be used to purchase the building or equipment.
SBA 7(a) Loan Interest Rates & Terms
The Small Business Administration was created in 1953 to improve the flow of credit to small businesses. It’s also the primary source of loans to small and emerging businesses. It was established as an independent agency through the Small Business Investment Act of 1958. It is authorized to make loans for business purposes on a revolving basis to small and disadvantaged businesses in all 50 states, the District of Columbia and Puerto Rico.
The SBA also issues loans on a non-revolving basis to businesses unable to obtain capital from other sources. In addition to the traditional 7(a) loans, the SBA also administers small business development center and rural business development loans.
In this post, we’ll take a closer look at an SBA loan as well as its interest rates and repayment terms. As a financial planner, my job is to educate you with everything I’ve learned about SBA loans. This post will help you take advantage of this small business lending program to grow your own business today.
SBA 7(a) Loan Requirements
The primary difference between the 7(a) loan and regular SBA loans is that the 7(a) is a 504 loan, meaning that the loans are supposed to be issued to small business owners who are either women or minorities.
Although both types of loans are guaranteed under the SBA, the 7(a) must be approved by the Secretary of the Army or the Secretary of the Navy in order to be guaranteed.
Since these are designated as ''minority enterprise'' or ''women-owned business'' loans, the regulations have been written in such a way that if a majority of the owners are not a minority or a woman, it is considered a violation of the regulations.
There are four main types of SBA loans: 5 loans, 7 loans, 9 loans and MA&E loans. The amortization period on these loans depends on the type of loan and other factors.
How to Apply for an SBA 7(a) Loan
The Small Business Administration (SBA) offers loans to small businesses of all types. The SBA 7(a) loan program is a smaller and faster loan program that offers financing to help small businesses grow.
While all SBA loans have the same basic terms, there are a few differences between them. To help you make the best loan decision, let’s take a closer look at the SBA 7(a) loan program.
The SBA 7(a) loan program is especially popular for small businesses that are involved in growing industries like real estate development, renewable energy, manufacturing, technology and even arts and cultural organizations.
If you’re ready to take the first steps toward securing financing, we’ve got the loan information you need. We’ll notify you with a reply within 24 hours.
SBA Express Loan Program
The Small Business Administration (SBA) Express loan (also referred to as an 8(a) Loan) is a fast-approach, low-down-payment loan that can be approved within 1-7 business days. Express loans are designed to provide funds to small businesses who aren’t eligible for conventional bank financing. They are made for businesses who have a credit score below 500 and who don’t have a business bank account or a history of borrowing money. Eligible businesses may take an SBA Express loan for repairs, equipment replacements, working capital or construction.
SBA Express loans require a down payment of no more than 5 percent of the loan amount. However, the down payment amount may be in the form of equity in your business. Equity is that portion of the business that can be sold or liquidated to pay off or defer the loan. For instance, if you have a loan approved for one million dollars and you provide a down payment of ten thousand dollars in equity (equity term of ten years), the remaining eight hundred thousand dollars of your loan would be considered a line of credit. In order to receive a loan, a small business must meet the eligibility requirements and pass the credit check. An SBA Express loan will be closed within two weeks, and, along with the SBA guarantee and Structured Adjustment, you can expect your money to be in the bank within 30 days.
SBA 7(a) Advantage Loans
The SBA 7(a) program is designed to help business owners in disadvantaged communities. This sort of loan can help a small business owner get the start-up funds he or she needs to be successful. The SBA defines a disadvantaged community as –any community with populations of fewer than 50,000 people, a poverty rate that exceeds the national average, or unemployment rates that exceed the national average.” Often, small businesses find that they can’t get loans from a bank because they lack collateral, but the SBA uses the business owner’s personal assets as collateral. This will help a small business owner get the funds and assistance he needs to get his or her business off the ground.
The SBA Guide to Business Loans provides an excellent resource to help you understand the process. The guide will explain everything from your eligibility to the terms and conditions of your loans. As the guide mentions, the loans can be used for many different purposes. For example, you might apply for a loan to buy a new piece of machinery or to start a real estate brokerage.
SBA loan applications are processed through the U.S. Small Business Administration’s website. If you need additional help or want to learn more about your options, contact the SBA directly.
CDC/SBA 504 Loans
CDC/SBA 504 Loans at a Glance
The Small Business Administration is a great resource for business owners who don’t have capital to fund a new business venture but still want to explore starting their own business.
CDC/SBA 504 Loan Interest Rates & Terms
504 loans are popular with government contractors and small businesses because they’re specifically designed to help very small businesses – defined as –micro” or –small” – and can be a good fit for their needs. While most small business loans are made through commercial banks, SBA has guaranteed loans that are made by a number of different private sources via the SBA Financing Program. Interest rates for SBA loans, including the 504 loan, are a bit higher than for commercial bank loans, but they’ll also give you a bit more flexibility (if you’re open to the idea), which can help you avoid expensive financial pitfalls that may come with banks.
The wiki defines a small business as one that has 500 or fewer employees, but it doesn’t have to be that small. That’s how a couple of businesses I’ve marketed to have qualified.
CDC/SBA 504 Loan Requirements
The SBA 504 Loan is a Development Loan that provides funding for the protection, restoration, replacement, or acquisition of buildings or facilities damaged or destroyed as a result of a federallydeclared disaster or during other periods of national emergency. The 504 loan program is funded through the U.S. Small Business Administration (SBA). The SBA 504 Loan Program provides financing and technical assistance to small businesses, small business concerns, small farm businesses, and cooperatives, to make their operations more productive, competitive, and sustainable.
The following are the major eligibility requirements to be eligible for a 504 Loan:
Physical Damage and Economic Injury
A) Property determined to be destroyed, damaged substantially, deteriorated, or in disrepair … and is in the immediate aftermath of the disaster (e.g. damaged by fire, flooding, wind, etc.)
B) Property that Is No Longer Economically Usable
C) The total estimated cost of repairing the property is more than 75% of its fair market value (FMV), excluding any value subtracted for depreciation.
D) The property must be located in a designated disaster area eligible for a program under this section. This area is generally the entire geographic area damaged by the disaster.
Weak Recovery
How to Apply for a CDC/SBA 504 Loan
Quick Guide
The United States Small Business Administration (SBA) offers loans to help small business owners expand their businesses and grow. The SBA primarily does this by giving out loans to businesses based on their financial need. Examples of some of the loan products that the SBA offers are loans to start a business, improve the business, or buy a business. Recently the agency has expanded its loan offerings to include loans to develop real estate, such as starting a restaurant or store on a property you already own. Loans with these requirement can be either called Development Company Loans (DCLs) or Real Estate Business Loans (REBLs).
How to Apply for a CDC/SBA 504 Loan
Step 1: Fill out the SBA 342 Loan Application
Step 2: Find A Business Loan Consultant
Step 3: Sign Your Loan Documents
SBA CAPLines Loan Program
SBA Peer-to-Peer (P2P) lending is a popular strategy for people wanting to enter the small business lending industry. But with low APRs and easy qualification requirements, they also can be a helpful tool for people who simply would like to tap into some of the SBA’s resources. The SBA Loan program is an excellent example of how the right type of loan can help borrowers.
The SBA offers a similar loan program called the CAPLines loan program. But what are CAPLines loans and how are they different from the SBA Loans?
CAPLines loans are SBA loans where the funds come from private investors who don’t have a commercial lending background. They are different because the CAPLines program is more limited to lenders who can’t qualify for loans from traditional sources.
However, if you are qualified for other types of SBA loans because of your financial situation, you can still apply for CAPLines loans. CAPLines loans are not guaranteed, but the SBA guarantees them until the ultimate holder of the funds recoups their investment. This allows the CAPLines loan to perform somewhat like a CD.
SBA CAPLines Program at a Glance
The SBA CAPLines program provides financing and technical assistance to businesses that provide advanced communications services to rural areas. Since CAPLines is a relatively new program and its application process was streamlined, SBA CAPLines is a great program to consider as you look to pursue an alternative route to financing your rural telecom services.
The SBA CAPLines program uses three types of loans to finance the purchase and installation of advanced telecommunications infrastructure in rural areas:
The SBA CAPLines program offers two types of loans to businesses that decide to go with private capital:
The SBA CAPLines program offers four types of grants to qualified projects:
The SBA CAPLines program uses indirect financing to provide loan and grant funds:
Some of the most common CAPLines requirements are organization requirements (size, location, etc.), organizational requirements (size, location, etc.), credit and financial requirements, and program requirements.
Organization Requirements
The organization requirements for the CAPLines program vary based on the general eligibility and asset size requirements. These requirements include specifics about what type of business entity you have. Some of the basic requirements include the following:
SBA CAPLines Interest Rates & Terms
The SBA is a great place to get a business loan if your business has exceptional financial need and you can put up some collateral against the loan.
If you qualify for an SBA loan, the SBA guarantees a portion of the loan, which is often called a guarantee fee. That fee is not charged on most SBA loans and can help you get a better interest rate. The interest rate on the SBA loan will generally be one of the best on the market. It’s important that you consider your business and your financial situation when applying for an SBA loan. If approved, the SBA will provide the funds as a loan, but you’ll have to pay back the loan with interest.
The SBA approves many small businesses for loans, and often its loans are the best-fit for your business.
So what is an SBA Loan and can you qualify for one?
The SBA provides a loan that is for a small business, called a 7(a) Loan. 7(a) Loans can be a great way to help a new business get off the ground, and they can also be great for existing businesses that need new equipment or other supplies in order to compete in a growing market or industry.
These loans function very similar to a conventional loan, so you might wonder if you can just go straight to a conventional loan for your business.
SBA CAPLines Minimum Requirements
The SBA has different types of credit loans that can be used by qualifying businesses of all sizes. One of the most popular products is the Small Business Administration (SBA) loan and its most popular product is the Small Business Administration (SBA) 7(a) Line of Credit.
Small Business Administration (SBA) 7(a) Line of Credit loans have a lot of potential benefits for small business owners and other individuals and businesses with SBA loan needs. SBA 7(a) Line of Credit is small business financing with very flexible terms, an easy repayment schedule customarily 2 to 10 years… and interest rates which are usually lower than other types of Small Business Administration (SBA) loans and lines of credit. But as with any type of loan or credit borrowing, SBA 7(a) Line of Credit has some important guidelines and tests that need to be met in order to acquire the loan.
In this article, we’ll outline who can qualify for SBA 7(a) Line of Credit loans and what requirement need to meet in order to obtain one. In addition, we’ll also explain the different types SBA loans and lines of credit and their corresponding cost/term.
SBA CAPLines Loan Types
How to Apply for an SBA CAPLine Line of Credit
SBA loans come in a variety of sizes, but we’ll focus on the most common: Small Business Administration (SBA) loans. CAPLine loans are one type of non-industrial SBA loan, which typically get their name from being used to fund construction or rehab projects such as building, rezoning or creating parking lots.
Typically interest rate: 6.5% fixed interest rate for term of 9, 12, or 15 years.
How SBA CAPLine Loans Work
The key to applying for an SBA CAPLine loan is to know exactly what you want to do with the loan. Is it for working capital to fund a business? Is it for a construction project? Is it to buy equipment? If you know exactly what you want to do with the loan, the form and application process will be a lot easier on you.
To apply for an SBA CAPLine loan, you’ll need to have your borrower business plan or SBA loan application prepared and ready to go.
The SBA loan application is divided into sections covering each of the following topics: financing, the collateral to secure the loan, the regular business financial statements, required tax certification and a note to use in negotiating the loan.
SBA Export Loans
There are three types of SBA Export Loans: Short-term, Intermediate-term, and long-term loans.You can apply for all three at one time or as needed. Short-term loans provide you with an up to 90-day export loan, and you pay interest on the loan for the first 14 days. Intermediate-term loans give you an 180-day export loan with no interest for the first 30 days. Application for an export loan can take as little as 24 hours.
Your export loan is going to be commercial in nature. Your export loan will be collateralized by the export goods or services that you’re going to export. Commercial loans generally are defined as loans that have to do with the raising of funds, the purchase of financial assets, or the exchange for real property, and the borrower will be a business in the ordinary course of business. It’ll be intended to help your business get ready to export.
SBA Export Loans at a Glance
Export loans approved by the U.S. Small Business Administration (SBA) are available for businesses that wish to purchase goods or services abroad through a qualified U.S. supplier. The SBA itself does not provide any funding to meet the export loan needs. Rather, the loans for export are authorized by the Export-Import Bank (EXIM) and the SBA.
SBA Export Loan Requirements
Businesses seeking export loans with the help of the SBA must first obtain a loan from EXIM for the purchase of the goods or services. Once EXIM has provided the loan, however, the SBA then provides the final loan guarantee.
The loan guarantee from the SBA is collateralized by export sale proceeds to ensure that the borrower will make the required export repayments.
SBA export loans can be advantageous to companies as the lender (EXIM) gets repaid with interest and you get to save on foreign exchange costs. Although these loans can be beneficial to small companies, they can also come with a higher cost than other financing options.
SBA Loan Requirements
To qualify for an SBA export loan, the firm must have a signed Purchase Order, acceptable funds to make payments with, and must guarantee the main export loan from the Exim Bank with its own collateral.
For qualifying firms, the SBA will allow financing with up to a certain percentage of own inventories based on the type of export order.
SBA Export Loan Types
SBA funds are used to help businesses with export financing. SBA loans include a variety of loan features and loan programs that help businesses expand and grow. Depending on your business’s needs, different export loan types may be right for your company. After you evaluate your company’s export financing needs, match the export loan to your needs. Here’s a closer look at SBA loan types and their loan features and loan programs.
SBA Term Lending:
Loan terms range from 6 months to 12 years. Your loan term depends on your company’s export lending needs.
Loan Programs:
Expand
These loans are typically used for working capital. The business uses the loan to purchase raw materials, purchase machinery or equipment, or for general working capital.
Innovate
The SBA Innovate program is for U.S. companies that are involved in product development, research and operational testing. The loan helps these companies with their expenses involved in the research and development (R&D) process.
Sell:
SBA Export Loan Interest Rates & Terms
A Small Business Administration (SBA) export loan is a much-sought after financing option for American companies. Unlike banks and other traditional lenders that tend to depend on an applicant’s credit rating, SBA offers loans selectively and on a basis of their work. SBA is considered to be a more reliable lender and it require less documentation from the applicant. If you are a company that has been looking for a stable, business-oriented loan, SBA is the right choice for you.
The SBA offers a number of lending options to export companies, of which the US Export-Import Bank loans are the most common ones. To be eligible for an SBA export loan, a business must operate in a sector that is subtracted from the Federal Trade Commission’s list of prohibited export activities.
Other lending options include the SBA 7(a) loan, 504 guaranteed export loan, and the SBA guaranteed L/C®.
SBA Export Loan Requirements
The U.S. Small Business Administration (SBA) offers export loans to companies that export products, services or technology to foreign countries. The loans provide financing to startups, small companies and mid-sized enterprises that want to expand their businesses in international markets, but lack the capital to do so independently.
These types of companies generally are credit-impaired, have little or no collateral, and are not eligible for funds from a bank or other regulated lender. Financing for businesses export no credit or those with a minimal credit profile, typically requires a large down payment. Because of these distinctions, loans from the SBA to purchase a new or used asset to be exported are used most frequently by companies that export. Export financing is also available to businesses that import products from foreign markets.
SBA Exporter Financing Types:
Export Credit Advance (ECA)
This loan provides working capital to a small business or sole proprietor who wants to export products or services. An ECA is disbursed when the business ships the export merchandise to the overseas buyer, providing an immediate source of funding while preparations are made for the receivables.
How to Apply for an SBA Export Loan
The SBA offers small business owners export loans to help make their overseas transactions a whole lot smoother. Taking that loan can make importing goods more cost effective and also help prevent your prized inventory of goods from getting stuck overseas.
According to the US Department of Commerce, the Export-Import Bank of the United States is the lead U.S. agency that helps small and medium-sized exporters borrow money (by providing low-interest loans) to help them go about an overseas sale.
The benefits of taking out an SBA-backed export loan are enormous. As an exporter, you’ll be able to develop lucrative market opportunities outside of the U.S. and you’ll have a lot more time to focus on your core business. All this will help you do better by your customers, strengthen your relationship with them, and support them on a whole lot more sales.
To obtain an SBA loan, you must follow a number of requirements. The best way to get a clearer understanding of the loan requirements is to first take a look at the couple of main types of SBA loans …
Step 1: What Type of SBA Loan Should You Apply For?
There Are Two Main Categories of SBA Loans that You May Apply for …
Larger Government SBA Loans .
SBA Microloan Program
Small Business Administration (SBA) microloans are guaranteed loans for small business. SBA microloans help build flexible small businesses, as well as provide self-employment opportunities to qualified borrowers.
These loans are intended to alleviate specific challenges faced by small businesses and their owners. There are several SBA microloan programs. The most well known is the Microloan program. The SBA also offers the following microlending programs:
- Homebased Business Loan and Services Program
- Disaster Loan Program
- Community Development Block Grant Program
Additionally, the SBA also offers various service programs that facilitate training and business counseling.
The SBA microloan program is one of the most important programs of the SBA. It is available to borrowers regardless of the size of their business. It enables businesses to continue despite periods of job loss. This program can help small business owners weather periods of economic instability.
Borrowers will apply for loans by filling out loan applications online. The application will include information on the business, the owner, and the operations of the business.
The purpose of the SBA microloan program is to help qualified small businesses with capital. Loans are available to any business for items such as working capital, funding inventories, and paying off borrowed money.
SBA Microloan Program at a Glance
New SBA regulations were passed in August 2014. Effective as of Aug 1, 2014, microloan programs are focused on small business entrepreneurs, very small business borrowers, and women.
These loans are required to be made to meet the special needs of borrowers (large or small, veteran or not, male or female). Under the new SBA rules, rates have been decreased and loan sizes have been increased, providing a model that meets the needs of the increasingly diverse and innovative small business marketplace.
The key components of the microloan program are:
Willingness to serve: The SBA and its financial institutions, are committed to establishing a presence and developing a network of financial institutions to provide a locally integrated approach to the delivery of underserved small business financial services.
Growth: Lenders must consider the business growth factors of the applicant.
There are two important definitions to understand when reviewing SBA loans:
Full time employee: An individual who is employed on a regular basis by a business. Full time employees are often eligible to receive SBA loans as well as loans from many other lenders.
Credit rating available by a credit reporting agency: This is one of the most important requirements. SBA loans are made directly with the eligible business applicant.
SBA Microloan Interest Rates & Terms
The SBA offers both FDIC-insured and non-FDIC-insured loans. With SBA loans, you have the option to select a term as short as three months and as long as nine years. And the interest rates and terms are fixed for the entire duration of the loan, meaning that all of your payments will stay the same every month.
The short-term loans usually have interest rates in the range of 4-8% and requires a down payment of 3%.
The most commonly used term for all SBA loans is the three-year term and interest rate is set at 7.75%.
Three-year terms are popular with businesses as they require less paperwork, are easier to manage, and offer certainty for the entrepreneur.
The SBA provides all the standard eligibility requirements that a business needs to be eligible for a loan. This includes income documentation, tax compliance, and an inventory of equipment and/or supplies.
Flexible loans can be used to start, run, or buy a retail, service, or wholesale business.
You can use this type of loan to purchase inventory, expand a current product line, chase down slow pay customers, and purchase new equipment.
SBA Microloan Requirements
The Small Business Administration (SBA) provides loans for businesses with low or average credit ratings. These loans are routed through a third party, which prevents the government from providing direct loans to borrowers. If your business needs capitalization, the Micro Loan program is the next best option to fill the void, since it doesn’t require collateral.
How to Apply for an SBA Microloan
Several SBA programs have rates and loan terms that will assist your small business in borrowing funds from the government, without charging interest.
The SBA is a private non-profit organization that assists small firms with everything from start-up capital to loan refinancing. The SBA has programs designed to help growing businesses receive funding from the government to fund growth and is authorized by Congress to make these funds available to lenders and borrowers.
The Small Business Administration is responsible for the following primary funding programs:
A program that is designed to assist small businesses in obtaining venture capital to start or expand their business operations.
A program specifically for existing small businesses whose working capital is limited or who have an immediate post-startup need for injecting new working capital into their business to continue operations.
A program that provides funding for the purchase of property, the acquisition of land, and purchase of equipment by qualified small businesses.
A special program that assists small businesses in purchasing, upgrading or expanding real estate in low income or inner city areas.
All of the above loans are a result of the value the SBA provides to the small business community based on their affordable rates, fair conditions and prompt loan delivery.
SBA Disaster Loans
Disaster loans, also known as SBA disaster loans, are for borrowers in an area devastated by a disaster. These loans are self-guaranteed or government-guaranteed.
A SBA disaster loan can be a short-term or long-term type of loan. The maximum length for a short-term loan is twenty-four months; the maximum length for a long-term loan is sixty months. Some of the main differences between long-term and short-term loans are the interest rates as well as the total loan size. Short-term loans have higher interest rates as well as lower loan amounts than long-term loans.
The SBA disaster loan application process is fairly straightforward. If you live in a disaster-prone area where there has been a recent natural disaster, you can apply for one of the SBA disaster loans as long as you meet the eligibility requirements.
SBA Disaster Loans at a Glance
SBA Disaster Loan Types
As a certified SBA lender, the National Disaster Loan Program team is available to serve you 24/7 in the event of a disaster. With the SBA, you can access loan funding to help supplement your disaster relief needs, including:
Pay for critical items like utility deposits and rent, goods and services, short- or long-term recovery programs, medical, transportation, funeral and burial costs, and insurance deductibles.
Cover the difference between what you can afford to pay and the actual cost of a service, product or labor.
Loan amounts may vary by situation. We’re here to assist you in getting the financing you need to help your business and employees recover.
If your organization needs the funding for multiple uses, you may be eligible for multiple loans or a combination of loans and grants.
In the event of a disaster, you have the option to apply for as many loans as you need.
Your loan will not reduce available government disaster relief funding.
Your loan is interest-free while you’re using disaster relief funds to repay it. Plus, if you’re using your loan to help pay for employee salaries and benefits while your business is closed, we’ll waive application fees and origination fees (subject to the non-profit program fee).
SBA Disaster Loan Interest Rates & Terms
Most borrowers that receive an SBA disaster loan can expect to pay a higher interest rate than normal SBA loans. The interest rate on SBA loans is not an interest rate in the traditional sense … we’re not talking about the interest rate you’ll pay on a savings or checking account here! Rather, it is a fee charged by the SBA to recoup its losses from the bank in the event of default. Since SBA loans are riskier than normal loans, the SBA assumes the rate it will charge is higher to compensate for this risk. Note that the SBA’s risk assessment is often inaccurate, but just now that the default rate on SBA loans is increasing, it has been forced to at least acknowledge this fact.
The initial interest rate for your SBA loan will typically be set by the SBA, and it varies according to the type of loan you get:
If you’re denied a conventional loan, the interest rate will be higher.
Conventional loans are not always denied … if you are denied a conventional loan, you may also be eligible for an SBA loan with a special program that has its own interest rate and terms.
SBA Disaster Loan Requirements
The Small Business Administration (SBA) offers disaster loan assistance in the form of loans and grants. Both of these types of assistance are intended to help small businesses that may be experiencing financial hardship and need assistance in order to keep their doors open after a natural disaster.
This article will cover the requirements of disaster loans and how to apply for one.
The SBA defines a natural disaster as any event that causes damages on a catastrophic scale. This includes any event that may cause significant business damage, serious personal injury, physical damage to the property and/or human losses.
Natural disasters can consist of a single event or a series of events:
- A tornado
- A hurricane
- A tornado
- An earthquake
- A major flood
- A drought
- A wildfire
- A flood
- An ice storm
- A power outage
- Winter storm
- A blizzard
- An act of terrorism
Although the SBA limits the amount of financial assistance it can provide, every disaster loan request is given consideration.
To qualify for a disaster loan, SBA requires the business to have been physically damaged and must be able to prove that the business is unable to continue operating.
How to Apply for an SBA Disaster Loan
Usually when a disaster like a hurricane strikes, the SBA is quick to respond by offering loans and grants to anyone affected by the disaster. When a tornado or flood ruins the infrastructure in a town, the SBA will help rebuild it and help make it stronger in the future. And they will do so in a way that doesn’t require hardworking families to repay the loan until 2022.
Why SBA Loans?
When providing the low interest, long repayment loans to businesses and households affected by a natural disaster, the SBA has a couple of good reasons to do so. First, it helps them offer high-quality loans to people in need. The SBA is made up of over 500,000 dedicated employees, and they often encounter not only people with need of a loan, but businesses looking for more loans.
Also, by providing these emergency loans via short-term, interest-free loans, it helps them mitigate the damage to the economy and the long-term impact of the disaster. The SBA Recovery Act, which was passed during the last recession, continues to provide funds and help families continue paying monthly payments on loans post-disaster and rebuild their local economies after the storm has passed.
Some types of loans the SBA offers include:
- A Homebuyer/Homeowner Loan
- A Home Rehabilitation Loan
- Manufacturing/Business Loans
- Savings Assistance
Comparing Types of SBA Loans
Getting a business loan requires an extremely high amount of thorough evaluation, personal attention and time. Make sure you’re getting the information you need to make a smart decision before you make a big commitment. There are several types of SBA loans, and each has unique requirements and procedures.
Below are brief descriptions and pros and cons of each type of business loan that the SBA offers. If you’re not sure what type of loan you’re looking for, start by answering these business loan provider questions.
How SBA Loans Work: SBA Loan vs Bank Loan
SBA Loans Frequently Asked Questions (FAQs)
What are SBA loans?
The SBA is an agency of the U.S. government that provides funding for small businesses … especially those that would otherwise be unable to obtain financing from traditional sources.
The federal government is setting aside some of the money it collects from taxes as a loan fund to promote economic growth and create jobs. To borrow from this fund, you need to meet certain eligibility requirements.
Who can receive SBA financing?
To receive funding from the SBA under its Loan Guarantee and Insurance Program, a business must be a small business. Small businesses include those that are not for profit (which would generally be nonprofit organizations) as well as private-for-profit businesses.
Businesses can be a part of the SBA network of lenders (called a lender network) or work directly with the SBA. To do so, they must meet certain eligibility requirements.
Nonprofits are usually eligible to receive start-up financing and some acquisition financing from SBA. However, loans guaranteed by SBA that are secured by nonprofit assets are ineligible for insurance coverage from the SBA. For more information, see Question 7.
Go to SBA.gov to learn about eligibility requirements, lender networks, and more.
How do I apply for an SBA loan?
Do I qualify for an SBA loan?
How long does it take to get approved for an SBA loan?
The quick answer is that it depends. On average, it takes about 4 weeks to get an answer on a small business loan, but it can take substantially longer in some cases. There are a couple of factors that affect this, so we’re going to cover them now.
Request Size
There’s no one-size-fits-all for how long it takes to get approved for an SBA loan. The amount asked for will definitely affect the length of time, but the questions asked as part of the usual application process will also have an effect.
There Are Two Main Categories of SBA Loan …
Category 1 and Category 2.
Category 1 loans are the ones that have the least amount of paperwork and require little to no discussion with the lender. Category 2 loans are often subcategories of Category 1 loans, which means that they’ll require a little bit of extra work on behalf of potential applicants. In many cases, this work includes a credit review as part of the application process.
So the amount asked for will definitely be a factor in terms of the amount of time that it takes, but both the nature of the questions asked and the required type and amount of paperwork will play a role as well.
Are SBA loans hard to get?
The SBA is tricky to get and guile, so your best bet is to work with someone who really knows what the SBA is capable of and what you’re likely to get a comfortable return on your loan.
It helps to have a solid business plan, past experience running a similar business, a reliable source of income and a good credit score.
With a lot of those preconceived obstacles out of the way, you should keep aware of the fine details that could hinder your chances of getting approved for an SBA loan.
What are SBA Loans?
SBA loans are small business loans made by the Small Business Administration (SBA), a part of the United States federal government. There are different types of SBA loans that are available depending on the size and the business’s specialty or industry.
If you qualify for SBA loans, you may have to put down some skin in the game, with the bigger loans requiring you to put down a sizable percentage in good faith (five to 10 percent for most).
Can I get an SBA loan for my startup?
The SBA is a great resource for young, startup businesses and modestly successful businesses – both of which are incredibly valuable and difficult to get conventional financing for.
Bottom Line
An SBA loan is designed to leverage the U.S. government's guarantee of most lenders' loans. You can go to a commercial lender and borrow your business startup costs but you will not have the government’s backing if you fail to repay the loan. The SBA loan program offers variable rates that are lower than your credit card rates and a wide variety of loan amounts. There is also additional help available with letters of credit that can be a last resort for clients who have a difficult time getting access to traditional credit.