Who Qualifies? Loan Programs/Amounts Loan Uses/Terms Eligibility
Choosing the right SBA lender
Created in 1953, the U. S. Small Business Administration (SBA), an independent agency of the federal government, has delivered millions of loans and loan guarantees to eligible small businesses across the country. The SBA provides eligible small businesses with access to capital, training and technical assistance, government contracting, and advocacy.
What makes National Penn the best source for SBA loans
- Dedicated SBA department - the sole purpose of our knowledgeable SBA staff is to quickly identify the appropriate SBA loan program to fit our customer’s needs, and work directly with the customer from application to closing.
- Preferred/Express Lender status - a sign of commitment to SBA and the quality manner in which we handle loans, our Preferred Lender Program (PLP) status allows us to approve loans in-house.
- Ties to the small business community - our Company was built on financing small businesses. As an independent regional bank, our success is tied to the success of our local business communities.
- Superior service - our Relationship Managers are dedicated to providing business solutions, not just selling products.
SBA guarantees loans to eligible small businesses that cannot obtain financing on reasonable terms through conventional means. Any of the following situations could qualify for an SBA loan:
- Existing business - can be used for expansion, purchasing a building*, leasehold improvements, equipment, inventory, and permanent working capital.
- Purchase of an existing Business - can typically finance 80%, and in some cases more, of the project, and can include the purchase of a building*, leasehold improvements, equipment, inventory, intangible assets, and permanent working capital.
- Start-up business - can be used for purchasing a building*, leasehold improvements, equipment, inventory, and permanent working capital. Generally requires 20% to 40% equity in relation to the total project, sufficient collateral, and demonstrated management experience.
- Franchises - must be approved by the SBA, and can be used for purchasing a building*, leasehold improvements, equipment, inventory, and permanent working capital, as well as associated franchise fees.
- 7(a) Term Loans: Can finance up to 90% of real estate*, and in some cases, up to 100% of equipment and working capital. The maximum loan amount is $5 million.
- Express Loans: Can be used for revolving Lines of Credit for working capital needs. The maximum loan amount is $350,000, although that may be temporarily increased by SBA.
- 504 Loans: Used solely for the purchase of equipment, or for the expansion or purchase of a building*. Done in partnership with a Certified Development Company (CDC), generally requires only 10% equity (may require 15% to 20% in certain cases). SBA portion is up to 40% to a maximum of $5 million, which can equate to a total project of $12.5 million. Rates for the SBA portion are fixed for the term. Substantial pre-payment penalties apply.
- Inventory and Permanent Working Capital: 5 to 10 years
- Equipment: 7 to 10 years
- Leasehold Improvements: 15 years
- Real Estate*: 15 to 25 years
- 504 Loans: Equipment – 10 years, Real Estate* – 20 years
* Owner must occupy 51% or more of the building’s total square footage.
A business must be deemed eligible by the SBA in order to qualify for financing. To be eligible, the business must be operated for profit. Further eligibility requirements include nature of the business, size of the business, and use of proceeds.
A business’ NAICS (North American Industry Classification System) Code is used to determine both the type and the size of a business. Size standards for the most part are either average annual receipts or the number of employees. Some examples of ineligible businesses are those engaged in speculative real estate investment, gambling, pyramid schemes, or illegal activities.
The use of proceeds must be for sound business purposes, and for example, cannot be used to refinance personal debt (unless it is specifically documented to have been used strictly for the business), or repay an owner or investor’s equity injection into a business. Other factors are also considered when determining eligibility, such as personal liquidity, prior loss to the government, or businesses with an associate of poor character.
Your Relationship Manager and SBA Specialist are able to discuss this in complete detail with you.