How Can an SBA Loan Help My Business?

Let’s begin with the basics…

What is an SBA loan?

An SBA loan is a commercial loan guaranteed by the U.S. Small Business Administration, specifically designed to help small businesses secure the funding they need.

“SBA loans are truly geared toward supporting the mom-and-pop types of small businesses in America,” says IncredibleBank Director SBA Division Elizabeth Bastedo.

What can SBA loans be used for?

The type of SBA loan you choose will determine how you can use the proceeds. In general, these small business loans can be used for the following purposes:

• Acquisitions (buying a business)
• Refinancing (debt relief)
• Succession Planning (transferring ownership)
• Partnership Buyout (taking more control)
• Commercial Real Estate/Construction (buying or building a location)

What are the most common SBA loans?

The most common SBA loan is the versatile SBA 7(a), designed to help small businesses with special needs.

“Our most widely used SBA product is the 7(a) loan, with a maximum loan size of $5 million,” explains Bastedo. “It can be used to finance a business acquisition, including the purchase of goodwill, or stock.”

There’s also the SBA Express Loan, a streamlined version of the SBA 7(a) that provides faster funding up to $500,000, making it ideal for small businesses in need of working capital.

Another option is the SBA 504 loan, commonly used for purchasing buildings, equipment, land, or other long-term financing.

“The 504 loan has a $5.5 million maximum,” says Bastedo. “It’s specifically for fixed assets, so it has to be tied to either commercial real estate or equipment.”

Does my business qualify for an SBA loan?

According to the U.S. Small Business Administration, to qualify for SBA financing, your business must:

• Be an operating business.
• Operate for profit.
• Be located in the United States.
• Meet SBA size requirements set by the North American Industry Classification System (NAICS).
• Not be an ineligible business type.
• Not be able to secure credit on reasonable terms from non-federal, non-state, and non-local government sources.
• Be creditworthy and demonstrate a reasonable ability to repay the loan.

The NAICS has size standards based on either employees OR revenue. “A common size standard is usually up to 500 employees or $7.5 million in revenue for reference,” explains Bastedo.

When applying for an SBA loan, you’ll also need to match your business to an NAICS code, which classifies your business based on the product or service you supply. You can also visit this U.S. Census Bureau page for more information and to view the latest NAICS Manual.

How do SBA loans differ from typical business or commercial loans?

There are several key differences between SBA loans and standard business loans, both for the borrower and lender.

“For the borrower, I would say the biggest advantages are having the ability for a lower down payment, a broader use of funds, and a longer repayment term,” explains Bastedo. “For example, a traditional line of credit may only offer a 36-month repayment term. With an SBA loan, you can go up to a 10-year repayment term. And if you’re purchasing a commercial real estate building, you can have a 25-year repayment term.”

Additionally, SBA loans generally have more favorable interest rates than regular business loans.

For lending institutions, SBA loans provide added security.

“SBA loans are partially guaranteed by the government, whereas with a conventional loan, a bank assumes the full risk if the loan goes bad or the business doesn’t make it,” says Bastedo.

What documents do I need to get an SBA loan?

For a startup business, you’ll need:

• A business plan with financial projections
• Personal financial statements (e.g., list of assets and liabilities)
• Personal tax returns
• A resume (to demonstrate your professional experience)

“For a startup, your business plan is going to be vital,” says Bastedo. “You’ll need at least two years of projections put together.”

Established businesses may also need business tax returns, bank statements, financial statements (e.g., profit and loss, balance sheets), purchase or leasing agreements, proof of insurance, and business licenses.

Your lender will help you determine your documentation requirements.

Is there personal liability with an SBA loan?

Yes. Any individual who owns 20% or more of the business is required to personally guarantee the SBA loan.

“SBA loans do require more skin in the game, but as long as you understand your business plan and what you’re looking to accomplish, there’s no reason that should scare you away,” explains Bastedo.

What’s the purpose of the U.S. Small Business Administration?

The SBA was developed in 1953 under President Dwight Eisenhower. It was a product of the Great Depression and World War II, with the idea of getting capital back into the economy for small businesses to thrive.

“It's really providing capital to small businesses that may not have other means to access funds,” says Bastedo. “It's designed for someone who could not walk into a big bank and get a conventional loan, because they may not have enough cash reserves, been in business long enough, or their credit isn’t perfect.”

Another focus at the SBA is providing funds to underserved markets, such as veteran-owned, women-owned, and minority-owned businesses, according to Bastedo.

How can I get an SBA loan?

Bastedo recommends following these three steps for getting an SBA loan:

“Have a clear-cut vision of what you’re looking for, especially as you start talking to lenders as to what type of loan you’re looking for,” says Bastedo. “Having a business plan on paper will help that conversation.”

Determine Your Financing Needs.

What are you looking to accomplish? Do you want to:

• Buy a building?
• Buy a business?
• Expand?
• Move to a new location?
• Add new equipment?

“It’s really understanding what you need to determine the structure of your loan,” Bastedo said.

Find the right lender.

“The process of getting an SBA loan can be daunting because it’s a government loan and there’s a lot of paperwork,” explains Bastedo. “But as long as you’re with an experienced lender, it can be very seamless and enjoyable, which is what we strive for at IncredibleBank.”

Why IncredibleBank for an SBA loan?

“Our SBA lenders are happy to start the conversation with you, walk you through the process, and kick ideas around,” says Bastedo. “We’re not expecting you to come in with a perfect plan and know specifically what you want. We’re here to make sure you get the right loan for what you’re looking to do.”

With IncredibleBank, you’re adding a member to your staff that always has your best interests in mind.

“We believe in building real relationships with our clients, which is why we send our own team members, not just a third party, for site visits,” says Bastedo. “It’s incredibly rewarding to see small businesses thrive in their communities, and we’re committed to being there every step of the way to ensure their success.”

How do I apply for an SBA loan?

At IncredibleBank, we offer three easy ways to apply:

Complete a Business Loan Inquiry Form (Opens in a new Window)

Connect with a Business Banker (Opens in a new Window)

Visit a Branch (Opens in a new Window)

What if I’m already a customer and IncredibleBank has requested my financials?

From here, it’s easy! Simply download the documents you need:

• SBA Personal Financial Statement (Opens in a new Window)
• Business Debt Schedule (Opens in a new Window)

When you have those completed, submit them using our Secure Upload.