What types of businesses are eligible for SBA financing?
Most small businesses in the United States qualify for SBA financing. Some of the basic qualifiers are that the business must be:
- Operating Companies organized for-profit
- Located and Operate in the United States
- Considered a “small” business according to SBA size standards (Most private companies in the US qualify as small!)
What types of businesses are NOT eligible for SBA financing?
There are certain businesses that are ineligible for SBA 7a financing such as : A non-profit business, a business that is primarily engaged in lending, a life insurance company, a business located in a foreign country or owned by undocumented aliens, a business selling through a pyramid or multi-level sales distribution plan, any business engaged in any illegal activity, a business deriving more than one third of its gross annual revenue from legal gambling activities, are just a few businesses that are not eligible for SBA 7a financing.
What is the maximum loan size for an SBA 7a loan?
What is the maximum term length for SBA 7a loans?
The term of a loan depends primarily on the purpose of the loan (often referred to as Use of Proceeds). Typically,
- Commercial Real Estate (Purchase or Refinance) – up to 25 Years
- Most other non-real estate related loans such as those for Business Acquisition, Equipment, Working Capital - up to 10 years.
What can SBA loans be used for?
VelocitySBA can provide financing for most legitimate business capital needs. Most inquiries will fall under one or more of the following categories
- Commercial real estate – Purchase or Refinance
- Equipment purchase
- Inventory purchase
- Business acquisitions / Partner Buyout
- Business debt refinance
- Long Term Working capital
What is an SBA preferred lender (PLP)?
Under the Preferred Lenders Program, the US Small Business Administration(SBA) delegates loan approval as well as closing and most servicing and liquidation authority, enabling them to make loan decisions more rapidly. In order to earn the Preferred Lender(PLP) designation, lenders must establish a successful track record, display a thorough understanding of SBA lending policies & procedures, demonstrated commitment to small business and have the ability to effectively serve the market.
VelocitySBA is proud to be a Preferred Lender and to be able to provide a faster and streamlined loan approval process.
Is there a prepayment penalty on SBA 7a loans?
For loans up to 10 years in term, there is no prepayment penalty. For 25-year loans, the prepayment penalty is 5% the 1st year, 3% the 2nd year and 1% the 3rd year. After the first 3 years, there is no prepayment penalty.
Is collateral required for an SBA loan?
Yes, an SBA lender will take a security interest in the business assets and/or a mortgage on real estate. Additional collateral may be required.
What are some ineligible uses of proceeds for SBA 7a financing?
- To repay delinquent IRS withholding taxes, sales taxes or similar funds held in a trust.
- To provide or refinance funds used for payments, distributions, or loans to Associates of the Applicant, except payment of ordinary compensation for services rendered at a fair and reasonable rate.
- Relocation of the business out of a community if there will be a net reduction of one-third of its jobs or a substantial increase in unemployment in any area of the country unless the relocation is for key economic reasons crucial to the applicant and the benefits to the applicant and the receiving community outweigh the negative impact on the community from which the applicant is moving.
- Community improvements, such as curbs and sidewalks, in excess of 5% of construction proceeds of the loan.
If I purchase a commercial property, do I need to occupy all the space for my business?
When purchasing an existing building, your small business must occupy at least 51% of the rentable property.
Do I need to buy the commercial real estate under my business name/entity?
No. You may purchase the property under your personal name or a separate entity so long as certain conditions are met. Your VelocitySBA representative can assist you in understanding how to do this.
Can I purchase a property as my second location?
Yes. There is no obligation that you own your existing or primary location before you can finance your second location under an SBA loan.
How soon do I need to move into the new property?
Your small business must occupy 51% or more of the space within 1 year of close of financing.