Your Guide to SBA Financing
Are you in search of financing options to launch or grow your small business? At Penn Street Mortgage, we are your partner in the SBA loan application process and can help you navigate the choices available to you and your business.
If you are in the process of obtaining financing or are curious how to get an SBA loan, we can help. Keep reading to learn all about SBA financing and understand your options.
What Are Franchise Financing SBA Loans?
Let’s start with the basics. SBA loans are long-term, low-interest rate loans designed to help small businesses get the financing and funding they need. While the U.S. Small Business Administration backs these loans, these small business loans are provided through local banks, credit unions, and other SBA-approved lenders.
Since SBA guarantees a portion of the loan, the SBA minimizes the risk for lenders and makes it easier for a small business owner to get the financing they need to grow their business, pay for new or existing franchise fees, sign a business lease, or other business expenses.
Penn Street Mortgage can help you explore your SBA loan options and walk you through the application process to help increase your chances of approval. Our experience in commercial lending can ensure you are set up for success and connect you with our lending partners to get you the best small business loans available.
Let’s explore the different SBA loan programs and who they serve.
SBA 7(a) Loan Program
SBA 7(a) loans are the SBA’s flagship program that gives business owners the most flexibility in loan terms. Small businesses can utilize SBA 7(a) loans for multiple purposes, such as:
- Working capital
- Franchise agreement fees
- Equipment financing needs
- Signing a business lease or renovation
- Refinancing debt
- Acquiring a franchise business
These loans can range from $50,000 to $5 million, with interest rates typically based on the prime rate plus a lender’s spread. They offer flexible repayment terms up to 10 years for working capital and equipment loans and 25 years for real estate loans.
This is one of the most popular SBA franchise loan options for business owners looking to get a loan for a franchise. Existing franchise owners can also benefit from SBA financing to help them pay expenses or fees that come with owning a franchise.
Eligibility Requirements:
- Be a for-profit small business operating in the United States
- Meet the SBA’s size standards
- Show a need for the loan and a viable business plan and business financial statements
- Have a vested interest in the business’s success
SBA 504 Loan Program
Another SBA loan program is a 504 Loan. This SBA loan is designed to help small businesses expand by helping them finance major fixed assets, like real estate, land, inventory, or equipment. This program is a partnership between the SBA, certified development companies and lenders.
The main features of a 504 loan include:
- Loan amounts up to $5 million
- Competitive interest rates, typically below market rates
- Repayment terms of 10, 20, or 25 years
Eligibility Requirements:
- Be a for-profit small business operating in the United States
- Meet the SBA’s size requirements
- Have a net worth of less than $15 million and an average net income of less than $5 million
- Plan to use the financed assets for business growth or job creation
SBA Microloan Program
Are you a startup business owner? The Microloan Program might be the right fit for you. This SBA loan caters to small businesses and startups in need of smaller loan funds, making it ideal for providing working capital or purchasing inventory, supplies, equipment, or furniture. This program only offers short term business loans since newer businesses have less business or credit history.
Features include:
- Loan amounts up to $50,000 (average loan amount around $13,000)
- Interest rates between 8% and 13%
- Repayment terms up to 6 years
Eligibility Requirements:
- Be a for-profit small business or startup operating in the United States
- Meet the SBA’s size requirements
- Demonstrate a need for financing and a sound business plan
SBA Disaster Loans
SBA Disaster Loans provide emergency financing for small businesses, homeowners, and renters affected by natural disasters like floods, hurricanes, or wildfires. These small business loans can help repair or replace damaged property and provide the working capital to help businesses keep their operations going during a time of disaster.
The loan features:
- Loan amounts up to $2 million
- Interest rates as low as 4% for businesses and 2.75% for nonprofits
- Repayment terms up to 30 years, depending on ability to repay
Eligibility Requirements:
- Be located in an SBA-declared disaster area
- Have suffered physical damage or economic injury as a result of the disaster
- Have acceptable credit and repayment ability
How to apply for an SBA loans
Ready to apply for a small business administration loan? Here are the steps you’ll need to take to submit your application.
Find the right SBA loan program for your business – As we just outlined, there are several different loans that you can apply for depending on your needs. Finding the right one is crucial!
Make sure you qualify – Before going through the application process, make sure your business qualifies.
Find an SBA lender – You can use the SBA’s Lender Match tool to connect with potential lenders, or let us help. We’re connected with SBA lenders across the region and can help you find the best one.
Get your application ready and submit – The loan process requires a detailed application including information about your personal history, business assets, personal financial statement, business tax returns, and more. Penn Street Mortgage can help review your application to ensure you’re putting your best foot forward.
Get approved – SBA approval can take several weeks compared to loans from online lenders or traditional bank loans. But, once approved, you’ll receive your funding and make monthly payments towards repaying debt. You can then use your funds for
Looking to get an SBA loan from the SBA Franchise Directory? Give Penn Street Mortgage a call today!
Navigating the SBA loan process is an in-depth and complicated process that really requires expertise and understanding to ensure you get approved for the business loan you need.
If you are ready to submit your SBA loan application form, Penn Street Mortgage helps you navigate the process and ensure you’re submitting the strongest application you can.
Give us a call today! We cannot wait to help you and your business.