Is Your Business Eligible for an SBA Loan?

Running a business can get expensive. If you find yourself needing some additional funds, an SBA loan can be a great option for small business owners. We’ve highlighted some essential information about SBA loans, including how to get one for yourself.

What are SBA loans?

The Small Business Administration (SBA) is a government agency which aims to help American businesses owners. One way they assist small businesses is through helping them find funding to help start and grow their companies. With SBA loans, small businesses are able to preserve additional cash for operating purposes. The SBA generally requires less money down on a project, making their loans more realistic for smaller sized businesses. They also offer longer terms and amortizations than conventional lending options, which allows business owners to keep more cash on hand.

What is the SBA 7(a) Loan Program?

The 7(a) Loan Program is the most popular SBA loan program. The 7(a) program offers financing for virtually all business expenses, with a maximum loan amount of $5 million. Key eligibility factors are based on what the business does to receive its income, its credit history, and where the business operates. 

An SBA 7(a) loan can be used for a variety of business purposes, such as:

• Acquiring, refinancing, or improving real estate and buildings
• Short- and long-term working capital
• Refinancing current business debt
• Purchasing and installation of machinery and equipment, including AI-related expenses
• Purchasing furniture, fixtures, and supplies
• Changes of ownership (complete or partial)

What makes a business eligible for an SBA loan?

To be eligible for an SBA loan, your businesses must meet certain requirements, including:

• Business Operations: Your businesses must be operating for-profit, officially registered, and operating legally. Certain types of businesses are ineligible for SBA loans, including firms involved in lending activities, any business whose principal activity is gambling, as well as those primarily engaged in political or lobbying activities. For a full list of ineligible industries, consult the SBA’s official regulations.
• Location: Your business must be physically located and doing business within the United States or its territories. 
• Business Size: Your business must qualify as a small business. In general, the SBA’s small business definition is an independent business with fewer than 500 employees; however, the precise threshold for each metric varies significantly by industry. You can get your exact size requirements based on your NAICS code. 
• Need for Financing: You need to be able to demonstrate a need for loans and be able to show the “sound business purpose” for which you plan to use the funds. You must also prove that you have attempted to find alternative forms of financing before turning to the SBA.
• Creditworthiness: As a business owner, you typically will need to have good credit. However, the SBA does not designate a credit score minimum, so you may have some flexibility depending on other qualifications. Overall, you need to be able to prove you have reasonable ability to repay the loan.

For more information on eligibility requirements for loans, refer to the official SBA site.

How do you apply for a loan?

If your business meets these requirements, which a vast majority do, then applying for an SBA loan is simple. As a Grasshopper client, SBA lending is made even easier thanks to Grasshopper’s experienced team of SBA leaders and our digital lending application. Get connected with these professionals today to kickstart your financing process.