If you’re looking to take out an SBA loan, one of the first things to do is to be aware of the requirements you have to meet. In today’s post, we discuss the requirements for the two most popular SBA lending programs: 504 loans and 7(a) loans. Keep reading to learn more.
SBA Loan Requirements: a Quick Guide
SBA loans are loans partially guaranteed by the government through the Small Business Administration (SBA), an agency whose stated goal is to help Americans start, build, and grow businesses.
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The SBA has different lending programs geared toward different business needs. For example, some loans are designed to purchase major assets such as real estate, while others were created with versatility in mind.
The two most popular SBA programs by far are 504 loans and 7(a) loans.
In the next sections, we’ll offer a quick overview of these two types of SBA loans with a breakdown of the requirements for each.
Requirements for 504 Loans
The 504 loan program is a financing tool that helps business owners purchase major fixed assets including:
- Existing buildings
- Land
- New facilities
- Long-term machinery or equipment
- Modernization or improvement of streets, land, or utilities
- Modernization or improvement of existing facilities
If you are interested in taking out a 504 loan, you should make sure to meet at least these basic requirements:
- Have a feasible business plan.
- Fall within SBA size guidelines (check here if your business is considered small by SBA standards).
- Operate as a for-profit company in the United States.
- Have a tangible net worth of less than $15 million.
- Have an average net income of less than $5 million after federal income taxes for the two years preceding your application.
To learn more about 504 loans or start the application process, contact Gellyfish Commercial today. Just fill out the contact form or visit our homepage and tap the icon on the bottom right corner to chat with an agent.
Requirements for 7(a) Loans
While 504 loans are designed for major assets such as heavy machinery or land, 7(a) loans are more versatile — in fact, they are known as the Swiss knives of loans, because they can be used for a wide variety of purposes, including:
- Working capital
- Refinance current debt
- Purchase furniture, fixtures, and supplies
These are the basic requirements for a 7(a) loan:
- Have a feasible business plan.
- Fall within SBA size guidelines (check here if your business is considered small by SBA standards).
- Operate as a for-profit company in the United States.
- Use alternative financial resources, including personal assets, before seeking financial assistance.
- Be able to demonstrate a need for a loan.
- Use the funds for a sound business purpose.
- Not be delinquent on any existing debt obligations to the U.S. government.
If you have questions about 7(a) loans or want to start the application process, fill out the contact form or chat with an agent from our home page.
What Are Some Alternatives to SBA Loans?
While SBA loans are an extremely useful financing solution, they’re not for everyone.
For example, the SBA has very specific rules about how you can use the proceeds of a loan and some business owners prefer a more flexible alternative.
That’s why at Gellyfish commercial, we offer a full range of financing solutions in addition to SBA loans. Here’s a quick breakdown:
- Conventional loans. This is the alternative if you have good credit and want more flexibility in how you can use the loan
- Bridge loans. For those situations where you need cash fast, for example, to cover the closing costs of a real estate purchase before you sell your current property.
- Revenue-based loans. A great option when you cant qualify for conventional loans. Here, you repay the loan not in fixed installments, but with a percentage of your revenue.
Interested in SBA Loans? Gellyfish Commercial Can Help!
If you need an SBA loan in California, or anywhere in the United States, Gellyfish Commercial is here to help you.
Contact us today by email (info@gellyfishcommercial.com), telephone (877-800-4493), or social media (Facebook, Twitter, LinkedIn), to schedule a free consultation or to learn more about our financing solutions.