Restaurant small business ready to open

What is an SBA loan?

An SBA loan is a loan guaranteed by the Small Business Administration, a government agency whose purpose is to promote small businesses in the U.S. A lot more businesses can qualify for SBA loans than you might think–if your company has less than $15 million net worth and $5 million average, after-tax net income over the last two years, then you are a “small business” under SBA rules.

Because SBA loans have a partial government guarantee, the rates are very competitive. However, the process of applying can be more complicated than other loans because the borrower must meet both the government’s AND the lender’s criteria.  An advisor like Speritas can match you with the right SBA preferred lender for your industry, loan size and needs – and we help with documentation.

If you qualify, SBA loans are a perfect solution for businesses looking to expand or improve their operations, acquire other businesses, or purchase owner-occupied commercial real estate.

So, how exactly can you use an SBA loan?


SBA Loans for Business Acquisition

Using an SBA loan, you can acquire another business, acquire a franchise, acquiring additional franchises, or even buy a business partner out.To take out a loan to acquire an existing company, the target business must be financially stable and able to generate cash flow to repay the debt. Lenders usually prefer the business to have been operating for 2+ years, but start-ups can be approved in some cases. Business acquisition loans have maturities up to 10 years.

Read about a recent Speritas SBA loan for a Pizza Restaurant Acquisition

Business Improvement and Expansion

Working Capital
An SBA loan can give you the working capital you need for a variety of small business operations, accounts payable, increased staffing, inventory, and supplies. Certain businesses can also use it as a long term, revolving line of credit. Working capital loans can have terms of 5 to 7 years.

Equipment Leasing
You can use an SBA loan to purchase or lease equipment, machinery, furniture and more. With an SBA loan, you can finance your equipment with terms of up to 10 years.

Leasehold Improvements
Renovating your space is also a good purpose for an SBA loan. Leasehold improvements can be financed up to 10 years.

If the loan falls under multiple categories, a weighted average of terms will be used.

Coffee Roaster obtains SBA loan in NYA Successful SBA Loan:
Speritas Helps Coffee Roaster Expand

An up-and-coming custom coffee roaster wanted to expand their production space to include a coffee bar for classes, training, and events. The expansion would cost $200,000.

Given the size of the company and the purpose of the loan, we recommended a cost-effective SBA loan.

We identified a bank that would be a good lender, assisted with documentation, submitted an application, and got approved. Our coffee roaster ended up with a 10-year loan at a competitive interest rate.

SBA Loans for Commercial Real Estate

An SBA loan can be a great way to purchase commercial real estate for your business. But, your business must occupy the majority (at least 51%) of the square footage of the building, which means you can’t use it for “fix-n-flip”. Real estate loans can have terms of up to 25 years.

Qualifying commercial real estate properties include:

  • Warehouses and factory spaces
  • Office and professional buildings
  • Restaurants
  • Auto repair shops and dealerships
  • Storefronts
  • Farms and agricultural facilities
  • Medical facilities and nursing homes

Who Can Qualify for an SBA Loan?

Only small businesses, as the SBA defines them, are eligible for SBA loans. This means your business must have a tangible net worth less than $15 million and an average after-tax net income of less than $5 million for the previous two years.

To qualify for an SBA loan, you first need to have a feasible business plan and relevant management experience for the business you operate or plan to operate. Additionally, you need good credit, generally a FICO score of 650 or higher.

We will help you determine if you meet SBA loan requirements, identify the right lender, tell your story, and lead you through the documentation process.

Other requirements:

  • Be located in the U.S. or its possessions
  • Not have access to other sources of funding
  • Not be delinquent in existing debt obligations

Also, the SBA prohibits loans to banks or other lenders, life insurance companies, certain private clubs, religious organizations, or businesss involved primarily in gambling, speculation, or political lobbying.

Contact Us

You need a strategic, cost effective solution to your financing needs and a funding partner you can trust. Let us put our decades of banking and structuring experience to work for you – contact Speritas Capital Partners about your eligibility for an SBA loan today.