You might be surprised to learn that your personal credit history matters when applying for an SBA loan. SBA disaster loans are disbursed in increments unlike other SBA loan programs, which give you the full amount at signing. Like most insurance requirements, they’re lengthy, technical, and confusing. SBA Loan Toolkit: Funding For Small Businesses. The SBA does not set a minimum time in business requirement. The other SBA loan under the CARES Act is the Economic Injury Disaster Loan, or EIDL. Those with certain criminal records may have trouble qualifying. One final requirement for the loan is that any real estate purchased must be 51% owner-occupied. SBA loans are designed to help small businesses that would have trouble getting similar funding elsewhere. Does this sound like you? Typically a maximum debt-to-equity ratio of three times for new businesses or four times for established businesses is acceptable; in other words, you need to have $1 in cash invested in your company for every $3 to $4 in loan funds, Your cash flow must be sufficient to cover all of your loans and other obligations with a cushion. These loans may be used for a brand-new business (subject to lender approval). Businesses that may benefit from an SBA loan include: While SBA loan funds can be used in a variety of ways, qualifying for an SBA loan is a challenge, especially for startup businesses. A history free from recent bankruptcies, foreclosures, or tax liens. Another thing SBA lenders look for is a business plan that shows you have a goal and direction for your business, as well as a plan for generating enough revenue to pay back the loan. As a Canadian citizen, you may be eligible for SBA financing if you’re a nonimmigrant (documented) alien of the US and have received an eligible visa. –If the loan is not fully secured, life insurance is required for the principals of sole proprietorships, single member LLCs, or for businesses otherwise dependent on one owner’s active participation, consistent with the size and term of the loan. If you don’t have one, get free business plan help at your local SBDC. Instead they are made by SBA intermediaries, which may include nonprofit lenders such as Community Development Financial Institutions (CDFIs). Tricia has nearly two decades of experience in commercial and federal government lending. There is a grant of $1,000 per employee, up to $10,000, that does not have to be repaid. Depending on the requirements of the specific loan, this equity injection may come in the form of cash that isn’t borrowed, a personal loan that can be serviced without using funds from the business, assets other than cash (verified by an independent appraisal) and/or debt that is on full standby (no payments of principal or interest for the term of the SBA-guaranteed loan). YouTube, 355 Lexington Avenue, 18th Floor We recommend SmartBiz for the quickest and most streamlined SBA loan process. One of the primary SBA loan qualifications is that your business must operate on a for-profit basis—nonprofit businesses are ineligible—and be US-based. You must have a physical location and mailing address in the United States. The most popular type of SBA loan is the SBA 7(a) loan, and most SBA loan requirements are based on the requirements for this program. Fit Small Business content and reviews are editorially independent. The financing option that’s right for you will depend on your circumstances, how much financing you need, and how quickly you need to receive the funds. Required fields are marked *. This means that in addition to the collateral used to secure the loan, the lender can also collect from your personal assets. Once you have received approval, funds are usually released quickly. No recent charge-offs or settlements 7. SBA 504 loans are an exception, given the lender or Certified Development Company (CDC) partnership. You also likely need a credit score that will fall into the Very Good or Excellent rating. The SBA prohibits loans to those who are Incarcerated, on probation, or on parole, (an individual with a deferred prosecution, conditional discharge, order of protection, or who is on a sex offender registry is treated as if the individual is on probation or parole); or who are currently subject to an indictment, criminal information, arraignment, or other means by which formal criminal charges are brought in any jurisdiction. The loan program is designed not just to give you money, but to also help you expand your business knowledge and grow your company in a way that positions your business more competitively in the marketplace. New York, NY 10017. SBA lenders finance small businesses. If you are uncertain as to whether or not your passive business may be eligible, you can inquire with your lender. Other SBA loans are made through lenders. Because the Small Business Administration offers a variety of loan programs, each may have its own set of requirements. Have at it! (Only if you want to get insider advice and tips), Get more information on the Paycheck Protection Program, Business Located in the United States and Its Territories, Most passive income businesses like apartment buildings and shopping centers. This loan is also called the CDC loan and is popular with borrowers looking to invest in real estate, construction, or equipment. The SBA loan requirements do not allow for financing of apartment complexes and other passive businesses. SBA loans are business loans offered, or guaranteed, by the SBA. Loan proceeds cannot be used for those industries restricted by the SBA. But you have to be willing to put in the effort. If not I’d suggest you start there so you can see options. In general, eligibility is based on what a business does to receive its income, the character of its ownership, and where the business operates. I am a Uber driver I don’t have business because self employed I have personal loan and credit card loan. One of the most popular options for small business loans is the SBA loan. Even if right now you don’t plan to apply for an SBA loan program, it’s still a wise idea to work on building your credit and organizing your finances so that, down the road, if you decide to apply, you are a shoo-in for a loan with a great rate. Know that the following aren’t black and white; if, for example, you don’t have a solid business credit history but have a decent personal credit score, you may still qualify. We’ll soon look at specifics for different types of SBA loans, but all of them have some overarching requirements: Keep reading to get details on each of these requirements, as well as an overview of more specifics for different programs. You must be logged in to comment. EIDL loans are made through the SBA Disaster Assistance office. A case worker will be assigned to monitor your progress and schedule subsequent disaster loan disbursements. These SBA loan eligibility requirements include being a small business located in the United States with a demonstrated need for the loan, operating in an eligible industry, and owned by U.S. citizens. A good credit score - preferably above 680. In addition to the eligibility requirements, there are a few additional qualities which can increase your likelihood of SBA 7 (a) loan approval. SBA loan submission requirements include: Borrower information, with a list of owners, percentage of ownership, criminal background and other personal information Articles of organization Only businesses that are both owned and operated in the U.S. qualify for SBA loans. SmartBiz offers a streamlined SBA loan process for SBA working capital loans up to $350,000 and commercial real estate loans up to $5 million, with loan terms of 10 to 25 years. Sign up to receive more well-researched small business articles and topics in your inbox, personalized for you. These loans must be repaid in 10-20 years, depending on the loan offered, making them a suitable option for long-term financing. SBA loan requirements specify how businesses can use loan proceeds, which vary by SBA loan type. There are several industries where the SBA will not guarantee a loan. If you don’t know the SBA loan qualifications and necessary steps, qualifying for an SBA loan can be difficult. This includes not having any delinquencies or defaults on debt obligations to the US government, including student loans. Lenders often prefer to lend to certain types of businesses. SBA loans aren’t known for their quick-turnaround approvals. If your business has international operations, you are only authorized to use the loan proceeds for your domestic operations. If you’re a veteran entrepreneur, explore SBA loans for veterans. Finally, not all businesses are eligible for SBA funds because of the industry they’re in. 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