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Applying for a SBA Loan
What You Need to Take to the Lender Documentation requirements may vary; contact your lender for the information you must supply. Common requirements include:
What the SBA Looks for
• Good character • Management expertise and the commitment necessary for success • Reasonable personal contribution and/or business equity, which along with the loan proceeds enable the borrower to operate the business on a sound financial basis (for new businesses, this includes the resources to withstand start-up expenses and the initial operating phase) • Feasible business plan • Adequate equity or investment in the business • Sufficient collateral • Ability to repay the loan on time from the projected operating cash flow Terms, Interest Rates and Fees
Note: All references to the prime rate in this brochure mean the lowest prime rate on the day the SBA receives the application. This rate is printed in The Wall Street Journal on the next business day. Your loan-repayment schedule depends on the use of the proceeds and the ability of your business to repay. The general terms are — • five to 10 years for working capital; and • up to 25 years for fixed assets such as the purchase or major renovation of real estate or the purchase of equipment (not to exceed the useful life of the equipment). Both fixed and variable interest rates are available. The maximum rate is 2.25 percent over the lowest prime rate for a loan with a maturity of less than seven years and 2.75 percent over prime for a maturity of seven years or longer. For loans under $50,000, or the SBAExpress and Community-Express programs, the lender's rate may be slightly higher. The SBA charges the lender a nominal fee to provide a guaranty, and the lender may pass this charge on to you. The fee is based on the maturity of the loan and the dollar amount that the SBA guarantees. On a loan with a maturity of one year or less, the fee is 0.25 percent of the guaranteed portion of the loan. When the maturity is more than one year, and the total loan is for $150,000 or less, the guaranty fee is 2 percent of the amount guaranteed by the SBA, and lenders may retain one quarter of this fee. However, the lender can seek reimbursement from the borrower for an amount equal to the full 2 percent of the guaranteed portion. For loans greater than $150,000, but not exceeding $700,000, the guaranty fee is 3 percent of the guaranteed amount, and the lender is not allowed to keep any of the fee. For loans greater than $700,000, the guaranty fee is 3.5 percent of the guaranty amount.
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