How To Pay Back An Sba Loan
Lenders willingly provide the funds you request under the assumption that youll pay it all back with interest. However, if you default on your loan, the SBA pays out the guaranteed amount. Defaulters who have signed a contract with a personal guarantee may have personal assets on the hook if the business cant repay the loan.
Most loans you get through the SBA have to be repaid. Exceptions include the Paycheck Protection Program and a portion of the Economic Injury Disaster Loan program .
The SBA loan process can be confusing, and theyre not your only option. In some circumstances, it may be advantageous to take out a 401 loan. Contact Ubiquity to explore your full range of financial options.
Best For Large Loans: Bank Of The West
;Bank of the West
With SBA 7 loans offered up to $5 million and an SBA 504 loan option for amounts as high as $15 million, Bank of the West takes the honors for best SBA lender for large loan amounts.
Maximum loan amount exceeds what most other SBA lenders offer
Interest rates that are among the lowest offered by SBA lenders
Branches in 20 states
Bauer Financial bank safety rating of 5 stars
No options available for loans below $50,000
Available mostly in states west of the Mississippi
No online application
Bank of the West provides the option for an SBA 504 loan of up to $15 million, which is among the highest in the industry. That makes it ideal for large real estate, construction, or equipment investments, and thus earns it our top ranking for the best SBA lender for large loans.
Founded in San Francisco in 1874, Bank of the West has since spread to serve most of the western United States and some of the midwestern states as well. You can find a map of their locations on their website.
Even if you dont need $15 million, Bank of the West can be a great choice if youre shopping for the best rate. They have a reputation for having some of the lowest rates.
Youll need to contact a banker to start the process. It doesn’t matter if youre after a $50,000 SBA 7 loan or a $15 million 504 loan, there is no online application process.
What Is An Sba Loan
The SBA offers a variety of loan programs that vary according to business needs. Its flagship program is the 7 loan program, which offers loans for most general business purposes. However, it also offers special programs such as microloans and disaster loans.
Below is a summary of the types of loans offered by the SBA:
Between its four main loan programs, SBA loan products can be used for most purposes. Borrowers can use loans for working capital, fixed assets like equipment, machinery, or real estate, inventory purchasing, refinancing, exports, or even startup costs.
Contrary to popular belief, the SBA does not originate business loans. Instead, the agency guarantees a portion of loans offered by partner banks, credit unions, non-profits, and other financial institutions. In the event the borrower defaults, the lender can collect their lost funds from the SBA. Because loans backed by the SBA are lower risk, banks and other partners are able to offer low rates and fees. SBA loans generally carry the best rates and terms youll come across.
For many businesses, however, expending a little extra effort is worth it to get a low-cost, government-backed business loan.
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Advantages Of Sba Loans
SBA loans allow for projection-based underwriting, which means prospective franchise business owners can obtain capital for initial businesses or store expansion based on profitability estimates. Other benefits may include:
- Generous term lengths, such as a 10-year term on non-real estate loans.
- Caps on interest rates, including a cap of 2.75 points over prime on loans over $50,000 with terms of at least seven years.
- Financing for up to 80 to 90 percent of project costs.
- Lower down payment requirements.
“The use of proceeds with SBA loans is beneficial to borrowers,” Randy says. “You’re allowed to use proceeds for all project costs, including the franchise fee, the construction, the equipment, the soft costs to get open, lease deposits and cash operating capital. You add all that up and let’s say it’s $500,000. Many SBA lenders will allow 10 percent down on that, so you pay a $50,000 down payment, plus you’re getting operating capital back. It’s a strategic move when you need to preserve your own personal cash. You’re putting less down and getting cash back. It’s good when you’re light on cash.”
Trust Your Business To A Preferred Sba Lender
With the passage of the Economic Aid Act, new borrowers may be eligible to receive an SBA Guaranty Fee waiver and up to three months of principal and interest SBA Debt Relief Payments on a loan approved by the SBA between February 1 and September 30, 2021, subject to the availability of funds.1
Our experienced SBA bankers are committed to your business.
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What Are The Different Types Of Sba Loans
There are several different kinds of SBA loans, so choosing the one that works best for your business can be a bit tricky. How do you find the right loan for your specific situation? Youll want to understand the options before you decide whats right for you.
Small businesses seeking financing should speak with their lender about their individual needs, Manger advises. The SBA provides guarantees on loans that lenders would not make on a conventional basis.”
To help make your decision easier, weve put together a list of eight of the more common forms of SBA loans at the time of this writing. That said, the SBA does change its offerings from time to time as the market dictates, so always check with them to be sure.
The SBA modernizes its loan program periodically to reflect the current market, Manger says.
When offerings change, the SBA provides updated information to lenders, who then provide it to the applicants, according to Manger.
Applicants can reach out directly to one of our 68 field offices or find information available on the SBA.gov website, which has the standard operating procedures for our loan programs, Manger explains.
To expedite your loan application, start with a look at the list of SBA-approved lendershere. For the fastest results, be sure to have all of the necessary documentation on hand before you apply.
Alternatives To Bank Business Loans
If you cant get a business loan from a big bank, consider these alternatives:
Community banks. Business loan applicants report higher approval rates with smaller banks than big-name financial institutions, as well as greater overall satisfaction, according to a 2020 Federal Reserve survey. However, the number of community banks is dwindling, and a local bank may lack benefits you want like online loan management or multiple locations.
Online lenders.Online business loans come with faster funding and higher approval rates than bank loans. Some online lenders even specialize in small-business loans. For example, as of September 2020, Live Oak Bank is the most-active SBA 7 lender by loan volume. Online lenders are also less likely to require traditional collateral and may provide funding for newer businesses. But the trade-off will likely be higher costs than a traditional bank offers.
Microlenders. Nonprofit organizations offer microloans, and these can be a good choice for startups or small businesses that need working capital but cant qualify for a bank business loan. Microloans are typically less than $50,000 and come with short repayment terms. Their costs will also likely be higher than a bank business loan.
About the author:Ryan Lane is an assistant assigning editor for NerdWallet whose work has been featured by The Associated Press, U.S. News & World Report and USA Today.Read more
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Who Needs An Sba Loan
Most small business owners use SBA loans and SBA Express loans to accomplish several goals. Here are some uses for which an SBA loan might come in handy:
Running basic business operations.
Purchasing long-term assets, such as equipment and machinery.
Buying furniture or supplies for your office.
Meeting payroll to take care of your hardworking employees.
In short, many business owners will find uses for SBA loans. Borrowers can use the money from SBA Express loans and SBA loans for most legitimate business purposes, though there are some restrictions, making them less flexible than other funding sources.
Newtek Small Business Finance
Newtek is one of the most active non-bank SBA lenders. In the last quarter of 2020, Newtek issued 380 7 loans for a total of almost $250 million. The company markets itself as a business and financial solution provider, offering business loans, payment systems, web solutions, insurance and more.
Through the SBA 7 program, Newtek lends to for-profit, U.S.-based businesses with two to three years of tax returns. In addition, when applying for one of these government small-business loans through Newtek, youll work with the same lending specialist throughout the process and Newtek will complete all required documents and forms for you.
Moreover, Newtek claims it can help you maximize funding by finding areas to grow your business, cut costs and minimize risk. To learn more about the Newtek SBA loan program, you can call customer service directly, or submit an online inquiry form to prequalify.
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How To Get An Sba 7 Loan
Before you head to one of these top SBA lenders, you first need to get a few documents together. According to Gerri Detweiler, Navs Head of Market Education, heres what youll need to gather up to start the process:
That list may seem like a lot, but its absolutely essential if youre going to tap into the world of SBA lending. Youll also need a good business credit score to qualify for an SBA loan. The FICO SBSS Score is the scoring model used to qualify borrowers for SBA 7 loans, so if your score falls below a minimum set by the SBA, it greatly decreases your likelihood of getting approved. You can sign up for a free Nav account to learn what your business credit profile currently looks like, and you can check out your FICO SBSS Score with a Nav Business Loan Builder account.
How Banks Can Profit From Sba Lending
All community banks are looking for ways to leverage their staff, maximize profit, minimize expense and build flexibility into their loan portfolios.
One effective way to do this is to participate in SBA lending and to use an SBA outsource provider to provide your bank with a simple and cost effective way to offer this product.
The primary SBA lending program, the SBA 7 guaranty loan, allows the bank to make small business loans and receive a 75 percent guarantee from the U.S. government. The guaranteed portions of these loans can be sold in the secondary market, with current gain on sale premiums of 13.5 percent net to the bank. So if a bank makes a $1 million SBA loan and sells the $750,000 guaranteed portion, it will generate a premium or fee income of $101,250.
While SBA lending can be very profitable, it should be viewed as more than just a profit center for your bank.
Outsourcing also enables a community bank to acquire, through the outsource provider, an experienced staff, which in turn enables it to provide an accurate and efficient process to its SBA borrowers. An SBA outsource provider can efficiently process, document, close, sell to the secondary market and service your loans. Typically these services charge between 0.6 percent to 2 percent of the loan amount.
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How Do Sba Loans Work
The SBA isn’t a lender itself; instead, the agency acts as a bridge between businesses and the financing options that are available. The agency’s vetted network helps narrow down the pool of lenders to those that are likely to be supportive of small businesses.
To apply for an SBA loan, businesses must show that they’re eligible for the program . Once the SBA has given its approval, the business owner can go directly to an SBA-approved lender to start the process.
Here are a few advantages of the SBA loan program:
- SBA loans require smaller down payments and have longer repayment periods.
- Up to 85 percent financing is available.
- The SBA guarantees lenders that their loans will be repaid, which takes away the risk they’d face by loaning to small businesses directly.
- Once approved by the SBA, businesses are more likely to get the funding they seek.
- The SBA sets guidelines for lenders to participate.
Aside from the SBA vetting process, borrowing from an SBA partner works like any other loan. If the balance isn’t repaid as scheduled, the lender is responsible for collecting the balance due. As with any other loan, businesses can negotiate a repayment schedule if they find themselves unable to make the designated monthly payments. If a borrower can’t pay, the SBA takes over since they guarantee the loan.
How Does The Sba Program Work
The U.S. Small Business Administrations mission is to help entrepreneurs start, build, and grow businesses. The SBA does not directly provide the loan. Rather, a lender provides the actual loan to the borrower and the SBA guarantees a portion of the loan. The SBA program allows lenders to make loans that may not otherwise meet conventional loan underwriting. Visit to learn more.
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The Sba 504 Loan Program Is For Businesses That Want To Finance Larger Projects Including Commercial Real Estate Heavy Equipment Construction And Major Renovations
In addition, the SBA 504 loan program features a debt refinancing program which can help a business improve cash flow by lowering its monthly payments on existing conventional loan debt.
- Low down payments as little as 10% of the total project cost
- Longer repayment terms up to 25 year repayment terms
- Larger dollar limits enables a business to finance the cost of acquiring and/or constructing larger fixed assets such as commercial real estate and heavy equipment
- Competitive rates providing more cash flow to use towards operating costs and the ability to fix the rate for a longer term.
Best Sba Lenders For The Most Popular Sba Programs
SBA loans are the gold standard of business loans. They come with high loan amounts, low interest rates, and long repayment terms. Due to the way each government loan program operates, the best SBA lenders will largely be unique to the specific program.
In this guide, weâll break down the best SBA lenders for the most popular types of SBA loansâincluding the 7 loan program, microloan program, and CDC/504 loan program. Weâll also explain how to choose the right SBA lender for your business, plus review the basics of the application process and answer some frequently asked questions.
The Best SBA Lenders for the SBA 7 Loan Program
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Do Lenders And Cdcs Have To Provide The Auditor With Access To Their Loan Files
Yes. Lenders and CDCs must provide the SBA, or auditor, with access to its files to review, inspect and copy any and all documents relating to SBA guaranteed loans, or as requested for SBA oversight. The lender or CDC must provide the auditor with access to its files during normal business hours. 13 C.F.R. § 120.1010.
Important Legal Disclosures And Information
All loans and lines of credit subject to credit approval and require automatic payment deduction from a business checking account. Additional fees may apply.
Bank deposit, treasury management, and lending products and services are provided by PNC Bank, National Association, a wholly owned subsidiary of PNC and Member FDIC.
PNC is a registered mark of The PNC Financial Services Group, Inc.
PNCs Retail Bank currently operates in all or part of the following States: Alabama, Delaware, Florida, Georgia, Illinois, Indiana, Kentucky, Maryland, Michigan, Missouri, New Jersey, New York, North Carolina, Ohio, Pennsylvania, South Carolina, Virginia, Washington DC, West Virginia and Wisconsin.; If your business is located outside of PNCs servicing area, then please call us at for further assistance.
Important information: Calls to or from us may be monitored or recorded by us for quality control and training purposes. By providing your phone number and/or email address, you consent and agree to receive phone calls and electronic mail from PNC, its affiliates and designees.
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Sba 7 Real Estate Loans*
Government-backed term loans for the purchase, refinance or construction of commercial real estate.
- Loan amounts up to $5 million
- Additional $2 million direct funding by U.S. Bank Pari Passu loan)
- Terms up to 25 years
- Fully amortized, no balloon payments
- Owner-user commercial real estate purchase
How We Chose The Best Sba Lenders
We began our research by looking at the past years most active SBA 7 lenders, filtering the list to about the top three dozen by both largest amount loaned and highest number of SBA loans processed.
In contrast, standard SBA lenders must send their applications to the SBA for underwriting and approval taking as much as a month to review. Since most business owners are anxious to have their loans approved and funded as quickly as possible, choosing a Preferred Lender will deliver the fastest turnaround.
We then filtered by Preferred Lender status, so as to avoid leading readers to any SBA lenders whose process would require an extra month in the timeline for SBA loan approval.
Next, we researched the geographic range of the remaining lenders, opting for those providing nationwide loans or, alternatively, covering as many states as possible. Some analysis was then conducted to compare program features, loan limits, number of available financing choices, the steps involved, and what the average interest rates were from the lenders last year.
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