SBA Loans: How to Qualify and Get the Best Rate

SBA loans. What are they, why are they so popular, and what do you need to do to qualify? Fast Business Financial will answer all your SBA loan-related questions (and some you may not have thought to ask) in this insider’s guide to the US Small Business Administration 504 Loan, also known as the “SBA loan.”

In this guide, we will share with you everything ever wanted to know about SBA loans and how you can obtain one for your business. Ready to get started?

About Fast Business Financial

Before we dive into how to qualify, get approved, and complete the process of securing an SBA-backed loan, this might be a good time to introduce ourselves. We are Fast Business Financial, a direct lender working to help small businesses get the best rates and terms on working capital products, including the SBA loan. To date, we have helped nearly 4,000 small business secure over half-a-billion dollars in financing to build their businesses. As an alternative lender, we can help you discover which type of loan works best for your short- and long-term business goals, and… get funded fast!

Current SBA loan terms and rates

Loan Amounts Term Duration
$5,000 to $5,000,000 5 to 25 years
APR (Rates) Approval Time
7.75% and up In as little as 2 weeks with Fast Business Financial.

What SBA loans are so popular

Commonly abbreviated to just “SBA loan,” a US Small Business Administration 504 or SBA 7(a) loan is a type of government-backed small business loan that can be used to finance capital improvements, fixed assets, buy inventory, expand operational capabilities, purchase real estate, and many other business activities.

Since these loans are backed by the Small Business Administration (up to 85% or origination), lenders have more flexibility when it comes to setting rates and terms for small businesses. This setup allows small businesses to get some of the best rates and terms on long-term loans. There are many complexities to this type of loan, so we will try to hit the most important points.

Low rates and long terms

The popularity of the SBA loan can be summarized with two key points: low rates and long terms. Plus, most businesses can forego putting up collateral by placing a down payment, or vice-versa.

Here are a few primary reasons behind the SBA loan’s ongoing popularity:

  • Very reasonable rates. Currently, Fast Business Financial has rates starting at just 7.75% on SBA loans.
  • Long terms. Depending on the type of SBA loan, you may be eligible for a 25-year term on the loan. This means business owners can repay the loan in small, easy-to-manage monthly installments.
  • Low or zero down payments. Typically, the most you will put down on an SBA loan is 10-20%. But, there are many instances where a down payment may not be required at all.
  • You may not even need collateral. Most SBA loans of $25,000 or less do not require borrowers to place collateral.

The SBA loan has so many positive aspects to it that the negative qualities are quickly dismissed. But, there are a few things you should be aware of before you apply for this loan. Of course, if you have perfect credit, have been in business for many years, and love the idea of filling out paperwork for hours on end, then skip right past this next section and go right to the application.

So… what’s the catch?

Every great thing in life is bound to have detracting qualities, and the same holds true with SBA loans. For one, there’s lots of paperwork to fill out. And, if you have a spotty borrowing history, you may find it nearly impossible to secure an SBA loan.

Those that have taken out a loan through a traditional lender will know how arduous the process can be; there’s paperwork, waiting, more paperwork, and more waiting. But, that type of loan is just between you and a bank, so you can only imagine how complex the process can be when you add a CDC and federal program into the mix.

Here’s what you can expect:

  • Lots and lots of paperwork. Since SBA loans are backed by a federal agency, you can expect there to be a lot of paperwork, and we mean… lots of paperwork.
  • Detailed checks on your credit. With most types of loans, Fast Business Financial has the flexibility to make exceptions for those with bad/poor credit, so long as the applicant can demonstrate steady revenue and has been in business for a year or more. With an SBA loan, the minimum FICO score needed to qualify hovers somewhere around the 650-700 range.
  • More paperwork. Did we forget to mention there is a lot of paperwork?
  • The waiting game. While Fast Business Financial can help to speed up the process, you may still find yourself waiting months before you learn the status of your application.

By working with a direct lender (such as Fast Business Financial) you can speed up the process of applying for and getting an SBA loan.

Beyond the time-consuming qualities of the borrowing process, SBA loans are still considered the crème de la crème in the eyes of small business owners. But, if you consider your credit score to be average and in urgent need of working capital, this type of loan may not be in your best interest. The loan specialists at Fast Business Financial can assist you in securing a loan that fulfills your needs as a business owner.

To learn more about the types of loans available through Fast Business Financial, give us a call and speak with a loan specialist today.

How to qualify for an SBA loan

Meeting the qualifications to receive an SBA loan is no easy task. For one, there is the physical endurance test of the application process in the form of paperwork. Then, there is a set of criteria that must be met before your application will be considered.

Here’s what you need to qualify for an SBA loan:

  • Credit score of 680. Since credit is a prime indicator of your borrowing history, the first thing a review will likely look at when you apply is your credit score. Applicants should have a FICO® score of 680 or above in order to qualify.
  • Several years in business. Length of time in business may not disqualify you from receiving an SBA loan, but your loan amount may less than you were hoping.
  • Steady revenues. Lenders want to know that your business is looking at a positive growth trajectory, and this means steady revenue increases. Businesses with annual revenues of $175,000 or more often have a better chance of securing an SBA loan compared to other businesses making less.

If you have a credit rating less than 650 and you’ve only been in business for a short while, pursuing an SBA loan may not be in your best interest. But, Fast Business Financial may have another option for you in a business line of credit or business term loan option that is perfectly in line with your business funding goals. Learn more about your borrowing options — call Fast Business Financial today!

A short history of the SBA loan

For years, small businesses knew they weren’t getting the same of kind of “sweetheart” capital financing offers as corporations and larger businesses. Suffice it to say, bank managers weren’t exactly rolling out the red carpet when a small business owner stopped by to request a loan. Many lenders viewed small business loans as a complete waste of time. But, if you saw it from the viewpoint of lenders, their shrewdness sort of made sense. After all, why offer favorable terms on a loan that may net a few hundred or thousands of dollars when banks could focus their energies on the “big fish” and earn millions?

And all those risky loans. According to the SBA, roughly 50% percent of all business ventures fail within the first 5 years, and within 10 years, roughly two-thirds of businesses succumb to the same fate. Lenders are in the business of making money, not losing it. So, extending loans to small businesses was (and continues to be) a high-risk venture with little reward.

The federal government recognized this lending gap between small and large businesses. To make it more appealing to lend to small businesses, lenders needed the right incentives and guarantees. The SBA loan did just that.

The SBA loan made it a borrower’s market for small businesses

SBA loans have a unique history that parallels major events in US history over the last 100-plus years. But, it all started with Herbert Hoover. In the depths of the Great Depression, President Herbert Hoover saw his newly formed Reconstruction Finance Corporation (RFC) as a way get people back to work and get the money flowing again. When World War II rolled around, these financing grants were rolled into the Smaller War Plants Commission (SWPC), which helped small businesses contribute to the manufacturing efforts during WWII.

The Allied victory in World War II ushered in a new age of prosperity for American businesses, and in 1952 the RFC was eliminated as a federal program. But, the elimination of the RFC and SWPC left a void in capital funding. Small businesses were again at the mercy of lenders.

In 1953, Congress passed the “Small Business Act” into law and established the Small Business Administration. The goal of this agency remains largely unchanged: “[to] assist and protect[…] the interests of small business concerns.” And, favorable borrowing rates and terms were very much on the minds of small business owners.

The SBA soon began acting as a direct lender, offering loans directly to small businesses and guaranteeing loans to small businesses through banks. In 1958, The Investment Company Act formed the basis of the Small Business Investment Company (SBIC). This program helped finance and underwrite loans through venture capital investors and privately held financial institutions. Six years later, the SBIC would expand the program to include businesses owners falling below the poverty line.

But, it hasn’t always been smooth sailing. There have been numerous attempts to eliminate the SBA and its programs. The closest the program has come to being defunded completely was in 1996, when the Republic-controlled House of Representatives made a concerted effort to abolish the Small Business Act, which would in turn eliminate the program completely. Fortunately, the program remains intact today and continues to support small businesses throughout the country.

Why small businesses are vital to the economy

In a 2017 report conducted by Forbes, the business and finance magazine found that out of all the businesses operating in the United States, a vast majority could be described as “small businesses.” In fact, the publication states that “out of 29.6 million businesses, all but 19,000 are small.” This is according to 2014 statistics.

Small business cover nearly half of all the payroll in the United States, over 30% of exports, and nearly 99% of all tech hiring.

While many of these are not household names, small businesses are truly the force driving American economy.

For all these reasons, Fast Business Financial loves working with small businesses. It’s just our part of fueling the American dream. If you are looking to secure working capital or a line of credit to take better position your business, call Fast Business Financial to see which small business loan is right for you.

Did you know?

An SBA loan isn’t one loan, but two. Before these loans are delivered to the borrower one-half is financed by an approved lender (such as Fast Business Financial), and the other by a Certified Development Corporation (CDC). There are over 250 of these non-profit CDCs operating throughout the country.

You may be eligible for business counseling. Certain types of SBA loans come with business counselling and educational programs to help small business owners get the most out of their loan and business.

To learn more about these programs, visit the Small Business Administration Learning Center webpage.

Ready to grow your business?

Get the funding you need, today!