About SBA Loans
SBA Loans can help growing businesses purchase or renovate real estate, acquire fixed assets such as heavy machinery or specialized equipment, borrow working capital for ongoing financing needs, or fund the acquisition of new businesses.
We find that many borrowers are not that familiar with SBA Loans and in general, what it takes to qualify so we’ve put together some information that we hope you will find useful.
General Qualifications
Your business is eligible for SBA financial assistance if it is:
- Operated for profit
- Organized as a sole proprietorship, corporation or partnership (including LLC and LLP)
- Doing business in the U.S. or its possessions
- Within the size guidelines found in the Basic Eligibility Requirements for each respective loan type:
General Collateral and Loan Requirements
For many types of SBA loans, the assets being financed - such as equipment or real estate - serve as the collateral for your loan. However, principal owners must have acceptable personal credit histories and may have to pledge available business or personally owned assets. SBA financing requirements can include:
- Personal guarantees of owners with 20% or more ownership in the business. Personal guarantees from active owners with less than 20% ownership may be required.
- Accounts receivable and inventory, depending on collection history and marketability.
- Machinery and equipment.
- Real estate and improvements.
What does CB&T Look For in a Successful Borrower?
After determining which loan program best fits your needs, CB&T will analyze your loan application based upon a combination of several factors.
Cash Flow Coverage
Cash flow sufficient to cover business debt service is required. Cash flow coverage is determined after owner’s withdrawals or officers' salaries, existing debt service and proposed debt service have been deducted. A sufficient amount of living expenses will be considered for sole proprietorships. Fluctuations in cash flow coverage must be explained.
Debt To Worth Ratio/Capital
Generally, a debt to worth ratio of 4:1 or better is expected, and required for start-up businesses. This ratio indicates to CB&T the equity within your business, or what the owners may have at risk. In cases where the debt to worth ratio is manipulated through forgiveness of debt, standby debt and market value balance sheet adjustments, you should fully explain the adjustment.
Collateral
CB&T does not set definite collateral coverage ratios, as these ratios may vary based on the individual loan request. In most cases, the primary assets of the business are required to secure the loan request.
Management
The amount of management’s direct experience in the business can determine collateral needs, pricing and overall viability of the loan request. Financial statements of existing businesses help indicate management’s abilities. Information should also be submitted on key management and guarantors, duties and responsibilities. For start-up businesses, resumes should be detailed enough to explain past history and how it relates to the start-up business.
Credit History
The borrower’s personal and business credit history are considered. Credit blemishes must be explained in order to justify continued credit consideration.
Conditions
You should also be prepared to address other conditions of your loan request that may affect the success of your business, such as industry trends, seasonality, location and competition.
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