SBA Loan Programs and How to Apply

What this video covers

Kay Mardon from the SBA Fresno District Office explains the mechanics, qualification requirements, and differences between primary SBA-guaranteed loan programs: 7(a), 504, and the Microloan program. The session clarifies that the SBA guarantees loans made by private lenders rather than lending capital directly, emphasizing repayment ability based on cash flow projections. This guide transfers directly to startup founders and operating small business owners seeking commercial financing.

Best for: For-profit small businesses based in the United States; Entrepreneurs seeking working capital, equipment, or commercial real estate; Startup owners needing financing between $5,000 and $5,000,000; Not applicable to non-profit organizations (except non-profit childcare centers for Microloans); Not applicable to businesses with prior unresolved default losses to the federal government

Chapters

1. 00:00 Introduction and SBA Overview
2. 01:01 Core Services Offered by the SBA
3. 03:37 Determining How Much Capital You Need
4. 04:42 Cash Flow Projections and Equity Injection
5. 09:30 Specifying Loan Use and Business Benefits
6. 10:46 Benefits of SBA-Guaranteed Loans
7. 17:45 How the SBA Loan Process Operates
8. 21:08 What Lenders Look For in Borrowers
9. 23:44 SBA Eligibility Criteria
10. 27:48 SBA Loan Programs Overview
11. 28:18 The 7(a) Loan Program
12. 30:50 7(a) Sub-Programs and Loan Limits
13. 32:06 Interest Rate Caps and Guaranty Fees
14. 36:52 The 504 Real Estate and Equipment Program
15. 39:32 Selecting Lenders and SBA Lender Match
16. 40:02 Required Documentation for Loan Applications
17. 42:56 The SBA Microloan Program
18. 48:01 Microloan Intermediaries and Regional Contacts
19. 50:03 Audience Q&A

Key points

• 04:42 Lenders require an equity injection of 10% to 50% for startup financing depending on the industry
• 07:50 Borrowers should build a 25% to 30% contingency cushion into their requested loan amount
• 11:08 SBA 7(a) working capital loans provide maturities of 7 to 10 years, compared to 1 to 3 years for conventional loans
• 11:17 SBA real estate loans carry maturities up to 25 years and are fully amortized with no balloon payments
• 14:10 The SBA guarantees 75% to 85% of eligible 7(a) loans against lender default loss
• 24:58 The SBA small business size standard cap generally allows tangible net worth up to $15 million and average net profit up to $5 million
• 30:56 Standard 7(a) loans have a maximum borrowing limit of $5 million
• 37:50 SBA 504 loans are structured as 50% third-party lender, 30% to 40% CDC/SBA debenture, and 10% to 20% borrower equity
• 44:45 The SBA Microloan program has a maximum loan amount of $50,000 and a maximum term of 7 years

Turn it into a project: Prepare and Submit an SBA Loan Application

Establish proper financial documentation, calculate needed capital with conservative buffers, and submit a complete loan proposal to the appropriate SBA lender or intermediary.

Phase 1: Financial Planning and Capital Sizing

1. 04:12 Calculate one-time startup expenses and recurring monthly operating costs
2. 05:14 Build a month-by-month cash flow forecast for the next 12 to 24 months
3. 06:36 Determine the exact break-even point where monthly revenue covers fixed and variable expenses
4. 07:49 Add a 25% to 30% working capital reserve to your total estimated capital need

Phase 2: Program Selection and Documentation

1. 28:18 Choose between 7(a) for general working capital, 504 for real estate, or Microloan for sums under $50,000
2. 40:24 Draft a detailed business plan including owner resume and industry experience
3. 40:25 Compile personal and business tax returns for the past 3 years along with personal financial statements

Phase 3: Lender Outreach and Submission

1. 39:46 Contact existing bank or commercial lenders in your area to confirm SBA lending status
2. 40:18 Register on sba.gov/lender-match to broadcast your loan request to regional SBA lenders
3. 48:01 Contact designated regional microloan intermediaries if applying for financing under $50,000

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