The raison d’etre for the Small Business Administration (SBA) is to guarantee loans made by lender organizations such as banks, which in practice allows money to flow into the economy via small business growth thus enhancing the overall macroeconomic picture. The big question is whether your company can qualify for an SBA loan in a strong economy. Let’s take a look at a few statistics involving the SBA, which could arguably be the single best government agency since the Eisenhower administration.
In fiscal year 2019, SBA loan volume exceeded $28 billion with more than 63,000 approved loans. The SBA’s New York District Office alone completed nearly $1 billion in lending ($946,472,819) during FY 2019. However, we did mention that the SBA was a government agency, and thus has its downsides. One of them is the tortuous-like pace in which they operate.
The most popular forms of loans under the auspices of the SBA are the 7(a), 504, and microloan programs. “A strong economy is powering America’s 30 million small businesses, and the SBA’s FY19 numbers bear that out,” SBA Acting Administrator Chris Pilkerton said. “When the economy is doing well, 7(a) lenders are more willing to provide capital without the need for a federal loan guarantee.”
The SBA’s flagship 7(a) loan program made approximately 52,000 loans totaling $23.17 billion in the past fiscal year. 7(a) loans guarantee loans to small businesses of up to $5 million that are commonly used for acquiring land, purchasing equipment, or working capital. 504 loans provide capital to small businesses for the acquisition of fixed assets to promote economic development in the form of long-term, fixed-rate financing, with more than 6,000 loans made for a total dollar amount of more than $4.9 billion. Further, the SBA’s Microloan program (less than $50,000) had another record year with more than 5,500 loans approved for nearly $81.5 million.
So now you know the statistics, so how does your business actually qualify for one of these loans? According to the SBA, to qualify for an SBA 7(a) loan, borrowers should be able to meet the following requirements:
- Time in business: 2 years
- A positive history of timely payments made by the business
- Personal credit score: 680 or above (considered a good credit score)
- Annual revenues of $120,000 or more
- An upward revenue trend
More than likely, you’ll need an excellent business credit score as well as good personal credit to qualify for an SBA loan or traditional loan from a bank. This will depend on the individual lender and business factors such as your revenue, cash flow and time in business. In addition, your business must operate as a for-profit company and you can’t be on the SBA’s ineligible businesses list, which includes life insurance companies, financial businesses such as banks and real estate investment firms.
As we’ve mentioned before, don’t overlook the SBA’s other programs that are available to you free of cost. The SBA is a go-to resource that provides advice, workshops, mentoring, and disaster recovery assistance. To learn more, visit www.sba.gov.