Let’s talk SBA! We have asked J. Kevin Riffey, our SBA Executive, top questions he receives when asked about SBA loans. Read through his answers to find more insight about the different types of loans. If you want to speak with a SBA Development Officer to explore SBA options for your business, you can find their contact info on our SBA Team page.
1. What is an SBA loan, and what types of SBA loans can borrowers get?
SBA loans are business loan programs administered by the U.S. Small Business Administration. There are two primary SBA loan programs – 7a and 504. SBA 7a loans are made by a lender and guaranteed by the U.S. Small Business Administration. They can be used for a wide range of financing including owner-occupied commercial real estate purchase and construction; business acquisition; start-up financing; furniture, fixtures and equipment purchase; debt refinance; working capital and more. SBA 7a loans have a maximum loan amount of $5 million. A borrower may have multiple 7a loans under that $5 million cap.
SBA 504 loans are used for long-term asset acquisition and refinance. Long-term assets are those with a useful life of 10 years or longer including owner-occupied commercial real estate and heavy equipment. These loans are made in partnership with a local Certified Development Company.
2. What’s the difference between an SBA loan and a regular business loan?
There are many differences between SBA and conventional commercial loans. They key differences are:
- SBA loans have more flexible underwriting criteria for debt service coverage, debt to net worth, collateral coverage, etc.
- SBA loans typically require a lower down payment / equity injection
- SBA loans have longer terms
3. Who is the best fit for an SBA Loan? What type of borrower would benefit from one?
Almost all small businesses would be a good fit for SBA loans and would benefit from one. In particular, borrowers looking for a loan with longer terms, lower down payment and more flexibility in underwriting should consider the SBA loan option.
4. What does it take to qualify for an SBA loan?
There are many qualifying factors laid out in the SBA SOP (Standard Operating Procedure). For starters the business must be for-profit and meet other eligibility requirements. After eligibility is met, we consider other factors such as the business history, its ability to repay the loan, credit and management experience of the principals of the business, etc.
5. What types of SBA loans does Bank of Central Florida offer?
We offer both 7a and 504 loans
6. What does your team look into when helping a client decide if an SBA loan is a good fit for their business?
The first thing we look at is eligibility for the SBA program. The business must meet SBA’s initial eligibility before we move any further. Certain businesses aren’t eligible for SBA financing. Those include non-profit businesses, passive activity businesses (for example, real estate investing) and others.
Next we look at what they’re trying to finance. If that client needs a loan with a lower down payment, longer terms, or more flexible underwriting, then it’s most likely going to be a better fit for an SBA loan than it will be for a conventional loan.
7. Why is Bank of Central Florida a good place to get an SBA loan?
Bank of Central Florida is a good place to get an SBA loan because our SBA team has decades of experience processing these loans. SBA loans have very specific criteria and processes, so it’s important to work with a lender who understands these and works in the program daily. Additionally, because we are a community bank, all underwriting, decision making and processing is done locally. We’re able to move faster than most lenders who have layers of bureaucracy.
Our SBA Team has a wealth of knowledge in navigating SBA loans. Connect with one of them in your community today.
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