What Is An SBA Loan And How To Get One

There’s lots of chatter in the small business world about SBA loans. Here are some fast facts about the Small Business Administration and how an SBA loan can help your small business grow and save money.

What is an SBA loan and how to get one?

The Small Business Administration (SBA) is a government agency founded in 1953 and created to support hard-working entrepreneurs and small business owners in the United States.

The mission of the Small Business Administration is “to maintain and strengthen the nation’s economy by enabling the establishment and viability of small businesses and by assisting in the economic recovery of communities after disasters.” It can be summed up by “3 Cs”.

The first C is capital.

If you’re looking for a way to finance your small business, SBA loans are the best bet with low rates and long terms. The SBA doesn’t actually make the loans but they guarantee a percentage of each loan made by partner lenders like SmartBiz. This guarantee reduces risk for partners who are more likely to help small businesses that can’t get access to conventional loans.

The second C is contracts.

The federal government spends $500 billion a year in contracts. Though counseling and training (usually free), the SBA helps over 1 million small business owners compete for and win government contracts.

The third C is counseling.

The SBA has a nationwide network of district offices, Small Business Development Centers, Women’s Business Centers and SCORE chapters. Business experts offer counseling and training to over 1 million small business owners each year. Data shows that businesses that spend three hours or more with an SBA counselor have higher annual revenue, more working capital and more employees as a result.

The SmartBiz team has created an infographic about the SBA recently published in Inc. Check it out here: 9 Surprising Reasons You Should Love the SBA--Even If You Don't Need a Loan

The requirements of eligibility for SBA loans are based on specific aspects of the business and its principals and vary from lender to lender. Key factors outlined by the SBA include what the business does to receive its income, the business owners' credit score, the character of its ownership and where the business operates.

If you are awarded an SBA 7(a) loan, you can use the loan proceeds to help finance a large variety of business purposes including:

  • Working capital
  • Equipment purchases
  • Adding employees
  • Increasing marketing efforts
  • Refinancing existing debt

SBA generally does not specify what businesses are eligible. Rather, the agency outlines what businesses are not eligible. (You can find a complete list here.)

For a SmartBiz loan specifically, here are some guidelines on how SBA loans work. SmartBiz has dedicated Relationship Managers assigned to assist with each application process and can answer specific questions.

  • Businesses that qualify for a SmartBiz SBA loan typically have $50,000 to $5 million in annual revenue and 1 to 40 employees. Most are profitable and cash flow positive. All are able to show that they can afford to make our low monthly loan payments.
  • Requirements include a minimum of 2 years in business, strong credit, no outstanding tax liens, no bankruptcies & foreclosures in the past 3 years, no recent charge-offs or settlements, no criminal record other than minor vehicle violations and current on government-related loans.

If you're ready to apply, read 5 Steps to Apply for a Small Business Loan. You'll learn how to apply for an SBA loan from start to finish.