SBA Loan Requirements

The SBA loan programis a guaranteed selection of loans (occasionally the loan is only partially guaranteed, because lender and the SBA share the risk), as well as a popular microloan program for small businesses. The SBA (Small Business Administration) offers 7 types of loans, but does not administer these loans themselves. Instead, they either fully or partially insure them (with the exception of the their disaster assistance loan program).

In this article I will go over the requirements and purposes of the most popular loans, as well as provide valuable (free) material and resources to potential borrowers. Unlike many loan programs every viewer can benefit from an SBA loan due to the fact that credit history need not to perfect, nor must profits exceed loan payments. Requirements are also more flexible than many privately available loans. Bear in mind that there are limitations and pitfalls, I will do my best to cover those later in the article.

Purpose

The SBA 7a loan is aimed at kick-starting a new or established business. The 7a is the most common form of loan making it widely available throughout the country with many banks and lenders taking part in the program.

The loan originates with a commercial vendor, not with the SBA itself. After having double checked your eligibility, you will need to find a bank or company that will offer the loan.

Eligibility

Requirements for the loans will tend to repeat themselves, however, there are some small differences -- so I advise reading them fully despite their redundant nature. Here are he full list of requirements for an SBA 7a loan:

• Your company must be for-profit
• Must operate within the U.S or within one of its possessions 
• Must adhere to the SBA size standard
• Must not be involved in illegal activities, or otherwise ineligible practices
• Loan proceeds must be put to good use
• The business must not receive funds from other sources
• Must be able to pay the loan on time (factoring in the estimated cash flow date)
• A working (read: approved) business plan
• Show good character

Purpose

The SBA 504 loan program is a fixed-rate, long term financing solution for economic development (buildings or machinery are two examples).

Eligibility

Requirements for the 504 are a little more complex:

• For profit
• Meet the aforementioned SBA size standard
• Funds granted by the 504 must be used for fixed-asset projects and cannot be used for refinancing, as working capital or repaying debt.
• The borrow can choose between 10 and 20 year maturities
• Machinery or assets acquired must have a life expectancy of at least 10 years.

In order to apply for an SBA loan, you will need to complete a lot of forms. I find that Business.gov's excellent form and SBA requirements checklist is a fantastic resource. Forms include:

• Loan Application
• Personal Background
• And Financial Statement

Getting "stuck in there" is your best way to understand the process.

For those of you worried about loan repayment I have also included the ever-useful loan repayment calculator that will allow you to efficiently project payment and give you a firm idea of where you, and your business, stands.