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For many small business owners, getting a small business loan may be their only way of turning their dream of business ownership into a reality. Some may turn to banks or credit unions to obtain the necessary funds. And one of the “popular” funding opportunities is a Small Business Administration Loan.

What is a Small Business Administration loan?

The U.S. Small Business Administration is a federal government agency that provides support and financing to small businesses. An SBA loan is made by a financial institution – such as a credit union or bank – and a portion of that loan is guaranteed by the SBA. Most large banks have an SBA loan department. What is a Small Business Administration loan?

The U.S. Small Business Administration is a federal government agency that provides support and financing to small businesses. An SBA loan is made by a financial institution – such as a credit union or bank – and designed to provide financing for the purchase of fixed assets, which usually means real estate, buildings and machinery, at below market rates. Most large banks have an SBA loan department.

While a SBA loan can get a business off the ground, it has certain disadvantages. The SBA has this reputation that it takes an arm and leg to get approved. For many business owners, jumping through all those hoops just isn’t worth the effort. A recent report surveyed business owners with five or fewer employees and discovered that 91% of owners said they had never applied for a SBA loan and 61% of owners said they’d be “not very likely” or “not at all likely” to apply for a SBA loan.

Popular SBA loans:

  • 7(a) ($150,000 to $500,000) – unsecured loan.
  • CAPLine – line of credit for seasonal financing, contract financing, builder financing.
  • SBA LowDoc (up to $150,000) – a streamlined program done within 36 hours.
  • SBAExpress (up to $250,000) – an instant program from the SBA.

At the time when alternative lenders hand out much bigger loans and advances and asking for little more from customers than a signature and a tax return. (The SBA doesn’t make loans itself. It partners with banks that are hesitant to make small business loans on their own. The SBA assures these lenders that the government will reimburse a portion of their loss if a business defaults on its loan.)

Landing an SBA loan usually takes from three months and even in some cases can be endless. A borrower has to put together detailed spreadsheets showing projected income month by month and year by year over a five-year period. And don’t forget about thick business plan laying out the past, present, and future of your overall business. After filling out reams of SBA forms, often two or three times each – this is what the SBA requires before it would guarantee you a loan.

Reviewing SBA loan requirements, borrowers should pay attention at the following:

  • Good credit (A to C+). This means no bankruptcies within the last seven years, foreclosures and unpaid charged off accounts. A few slow pays may be acceptable if the loan package is strong.
  • A good business plan.
  • Sufficient investment from the owner. Preferably, a capital infusion of 25%-30% is best, though 10% capital infusion can be sufficient.
  • Collateral (fixed assets, equipment, or real estate).
  • Ability to repay.
  • Great amount of financial documents.

A SBA loan application requires in depth financial documents and a business plan – reference the loan application checklist before you apply. 800fund.com, an alternative online lender, requires a 1-page application, 3 to 6 months of credit card processing and bank statements.

SBA loans have a maximum of $500,000. 800fund.com advances range from $1,000 up to $1,000,000.

The SBA requires tangible collateral and typically about 20% down from the business owner. 800fund.com’s advances are backed by a personal guarantee.

800fund.com LLC provides Merchant Cash Advances, Working Capital, Alternative Financing, Business Loan Alternatives, Invoice Factoring, Purchase Order Financing, Unsecured Business Financing, Poor Credit Business Loan Alternatives.

If you have any additional questions, please contact us at 212.865.3863.

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