An SBA loan is a business loan that is guaranteed by the Small Business Administration (SBA). The SBA, with the exception of the EIDL program, does not lend directly but guarantees up to 80% of the loan made by an SBA-approved lender. This means that, in the event the borrower defaults on the loan, the SBA will cover up to 80% of the value to the lender.

This guarantee allows the lender to provide lower rates and longer terms to borrowers.

No. There are several SBA-guaranteed loan programs, the main ones being the following:

7(a). The 7a and 7a express program is the SBA's most popular program and serves most business expense needs, such as working capital, debt refinancing, and certain expansion needs.

The maximum amount that can be applied to this program is up to $5 million with repayment terms ranging from 5 to 25 years. Rates may vary between 6% and 12% APR.

CDC 504 Program. This program is designed for the need to purchase large fixed assets such as business property, large machinery or large equipment.

The program has a maximum application amount of up to $5.5 million and repayment terms of 10 to 25 years. Interest rates range from 4% to 5% APR.

The main requirements to apply for an SBA Loan are the following: 

For the 7a, 7a express and 504 programs:

• The business must be legally established for at least three years.

• The business owners must have a credit score of at least 650 points.

• The business owners must be U.S. citizens or permanent residents.

• The business can demonstrate that it has the ability to repay the loan.

SBA loans are loans that require a large amount of paperwork and some preparation on the part of the business. These are the most commonly required documents for SBA loans:

• Business tax returns for the last 3 years

• Personal tax returns for the last 3 years

• Business financial statements: Income Statements (P&L) and Balance Sheet

• List of business assets

• List of business debts

• Personal Financial Statement (in a format established by the SBA)

• Financial projections for the next 24 months stating the performance and use of the funds received and how they will multiply the business income, with the respective assumptions

• Business plan stating (no more than 10 pages) what is the plan for the company to achieve the proposed objectives

• ID's of the owners

• Bank statements for the last 6 months of the business

According to the latest changes generated by the SBA, since the coronavirus pandemic, SBA loans over $350,000 require asset-based collateral. Now, any loan over $25,000 will require a Personal Guarantee which means that if the business fails to cover its loan, it is the business owner who must cover the loan with his or her personal income and assets.

One of the main challenges that exist for SBA loans is the processing time that an SBA process can take, plus the documentation and number of qualification requirements involved.

On average a 7a and 7a express process can take 45 to 60 days and a 504 process that involves an asset can take 4 to 6 months.

At Capifinders we have simplified the work process in order to improve and facilitate the process of applying for an SBA Loan, both for the pre-qualification process and then for the preparation process involved in applying, in addition to having a network of lenders that allows us to make the process easier and more convenient for you.