Small Business Administration (SBA) Loans
- Is my business eligible for SBA financing?
- What are the advantages of SBA financing for my business?
- How much can I borrow?
- What can the funds be used for?
- Aren't SBA guaranteed small business loans only for businesses that are not creditworthy by traditional banking standards?
- What amount of equity will I be expected to have in my financing request?
- What else do I need to know?
- Will the government be looking over my shoulder for the duration of my loan?
- What are some common myths about SBA financing?
- Can SBA financing be used for construction?
- What costs are associated with an SBA loan?
- How long will I have to wait for a decision on my application?
Over 95% of the nation's companies are classified as "small businesses" by SBA standards. Limitations are set by total revenues and number of employees according to industry. Almost every type of business qualifies for SBA financing: manufacturing, wholesale, service, retail. Loans cannot be made to speculative businesses, media businesses or businesses engaged in gambling activities. Select one of the following for more information:
Simply put, a longer term means lower payments. Lower payments allow you to retain and utilize more working capital, which is essential for a growing business. Additionally, there are minimal prepayment penalties on SBA loans. All SBA loans are fully amortized. Therefore, your business will not be impacted with renewal fees, interim appraisal costs or untimely balloon payments.
Zions Small Business Finance offers SBA 7(a) financing up to $2 million and SBA 504 loans up to $5 million.
Loans can be used for virtually any legitimate business purpose. Examples include: Purchase real estate, make improvements to your business property, purchase equipment, expand a business, consolidate debts, purchase another business, construct a new facility and finance a franchise.
On the contrary, SBA financing will not be extended to any business that does not demonstrate the ability to repay debts. The longer terms allowed with SBA financing can enable your company easier debt qualification based on lower payments.
For an existing business, borrower equity can be as little as 10%, depending on creditworthiness. Start-up businesses are required to contribute at least 30% of the total project costs. Equity injection is typically cash.
- Sufficient cash flow to meet proposed debt service
- Personal guarantees are required
- Hazard insurance is required
- Current appraisals are required on real estate collateral
As with any commercial loan, your lender, rather than the government, monitors and services your loan. The government's involvement relates to the guarantee only in the event of default.
- It does not take 6 to 9 months to get funded. On average, it takes 60 days to process an SBA loan from submission to final funding.
- You do not have to be "turned down" by a bank prior to applying for an SBA loan.
Yes, as long as the business will occupy at least 60% of the new building. The construction loan will convert to a fully amortized loan at the end of the construction. If an existing building is financed or refinanced, your business must occupy at least 51% of the facility.
By statute, the maximum rate charged is 2.75% over the National Prime Rate for loans with maturities of seven years or more, and 2.25% over national prime rate for loans with maturities of less than seven years. The SBA itself charges a guarantee fee based on the loan amount, which is the only cost associated with the benefits of long term SBA borrowing. This fee can be financed as part of the loan proceeds. In addition, as with any other loan, the borrower will be responsible for direct processing costs such as title insurance, appraisals and other closing costs.
Qualified applicants are given a pre-qualificiation letter (letter of interest) outlining major points of the loan, if requested. Upon receipt of all required information from the borrower, a formal request is submitted to our underwriters, with a decision usually within 5 business days.