How much can I realistically get for a small business loan?
How much of a business loan you can get depends on your business's annual gross sales, creditworthiness, current debts, the type of financing, and the chosen lender. In general, lenders will only provide loans up to 10% to 30% of your annual revenue to ensure you have the means for repayment.
Average SBA loan amounts
According to the 7(a) and 504 Summary Report from the SBA, the average loan amount during the 2022 fiscal year for all types of 7(a) loans was $538,903. The average amount for all types of 504 loans was $995,029.
SBA 7(a) loans are available up to $5 million and SBA Express loans are available up to $500,000.
Required annual revenue: $50,000+
Getting a $10,000 business loan can be easier than larger amounts, since you pose less risk to the lender. But you might want to steer clear of big banks and look to less-conventional lenders for funding of this size.
Do SBA loans require a down payment? Yes, the minimum SBA loan down payment requirement is 10% for 7(a) and 504 loans, although this amount can vary based on a business's cash flow and collateral. For example, weak cash flow or low-value collateral can increase the down payment requirement to 30% of the loan amount.
While getting a business loan can be difficult since most require strong personal and business credit scores, reliable cash flow and at least two years in business, there are alternatives available to obtain the cash you need.
SBA 7(a) loan terms
7(a) loans do not have a minimum loan amount and max out at $5 million. The SBA guarantees 85% of your loan if it's less than $150,000 and 75% if it's more than $150,000. However, it limits guarantees to $3.75 million. SBA loans aren't easy to qualify for.
The monthly payment on a $20,000 loan ranges from $273 to $2,009, depending on the APR and how long the loan lasts. For example, if you take out a $20,000 loan for one year with an APR of 36%, your monthly payment will be $2,009.
The most common reasons SBA loans are denied are poor credit, too much existing debt, or insufficient collateral. Other reasons include: Prior bankruptcy. Negative taxable income.
- Be a for-profit business of any legal structure.
- Be independently owned and operated.
- Not be nationally dominant in its field.
- Be physically located and operate in the U.S. or its territories.
What is the easiest SBA loan to get?
SBA Express loans, part of the SBA's 7(a) loan program, offer the easiest application process and the fastest approval times among all SBA loans. These loans, with payoff periods as long as 25 years, are designed for purposes such as refinancing debt, buying equipment, or improving real estate.
- The microloan program provides loans up to $50,000 to help small businesses and certain not-for-profit childcare centers start up and expand. ...
- Each intermediary lender has its own lending and credit requirements. ...
- Microloans can be used for a variety of purposes that help small businesses expand.
On average, most SBA loans take 30 to 90 days from applying to funding. 7(a) loan subtypes are backed directly by the SBA. The SBA's turnaround time is 2 to 10 business days, but approval from your chosen lender can take 30 to 60 days. Microloans are loans for smaller amounts of $50,000 or less.
Term loan | While banks and credit unions typically require a score of 670 or above, online lenders may only require a score of 500 |
---|---|
SBA loan | Lenders offering SBA loans require credit scores between 620 and 680 |
- Too much debt.
- Bad credit history.
- You don't meet the lender's eligibility requirements.
- Not enough collateral.
- Not enough free capital or cash flow.
- Don't have a business checking account.
- High-risk industry.
- Don't have a business plan.
SBA loans are generally attractive to small business owners because of their guaranties and interest rate caps. However, drawbacks include long loan closing processes and collateral requirements.
Default on the SBA Loan
First, the lender will seek payment from the business for the outstanding balance of the loan. However, if the business cannot pay the full amount, the lender will foreclose on the collateral pledged by the business. Your business assets may not have much value.
Time in business.
It's not uncommon for bank lenders to require two or more years of business experience to qualify for a loan. This is problematic if you haven't yet launched, so you'll likely be better off with an online lender that extends financing to startups.
- Determine how much funding you'll need.
- Fund your business yourself with self-funding.
- Get venture capital from investors.
- Use crowdfunding to fund your business.
- Get a small business loan.
- Use Lender Match to find lenders who offer SBA-guaranteed loans.
- SBA investment programs.
If you're planning to apply for startup financing, be prepared to provide your personal credit information in addition to any business credit history and score you may have. You may also want to consider what collateral you can use to secure a loan—and improve your chances of approval.
What do you need to be approved for an SBA loan?
Personal financial history: Along with your business credit history, be prepared to share your personal income tax returns. Personal credit score: Those with a personal FICO Score of 680 or higher may have a greater chance of being approved, but some types of SBA loans might have even lower credit score requirements.
- Be an operating business.
- Operate for profit.
- Be located in the U.S.
- Be small under SBA size requirements.
- Not be a type of ineligible business.
- Not be able to obtain the desired credit on reasonable terms from non-federal, non-state, and non-local government sources.
The SBA requires residential or investment property collateral if the available equity (defined as “asset value less existing mortgage and /or HELOC liabilities”) is more than 25% of the value of the property. However, the value cannot be determined by you in your personal financial statement.
A $20,000 loan at 5% for 60 months (5 years) will cost you a total of $22,645.48, whereas the same loan at 3% will cost you $21,562.43. That's a savings of $1,083.05. That same wise shopper will look not only at the interest rate but also the length of the loan.
Loan Amount | Loan Term (Years) | Estimated Fixed Monthly Payment* |
---|---|---|
$10,000 | 5 | $207.54 |
$15,000 | 3 | $463.09 |
$15,000 | 5 | $313.13 |
$20,000 | 3 | $617.45 |
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