The 7(a) Loan

This is the most popular type of SBA Loan. It can be used for almost any purpose: hiring more people, purchasing new equipment, paying off existing debts, ordering bulk inventory, etc. You can access up to $5M, with repayment terms of up to 25 years, depending on the type of investment. Interest rates range from 5% – 10%. There is a 1.7% fee for loans up to $150K and a 2.25% fee for loans greater than that amount. This fee might be presented as part of the total cost of the loan. There may also be an origination fee or loan packaging fee.

7(a) Loans cannot be used for certain purposes. These purposes include: purchasing a building that will be leased to another business, reimbursing a business owner for a previous investment in the business, and repaying debts owed to the US government.

The CDC 504 Loan

This loan can only be used to purchase major assets, like heavy-duty machinery and commercial real estate. In most cases, the assets being finances are used for collateral.

You can access up to $5.5M, with repayment terms of up to 20 years. Interest rates range from 5% – 6%. Total fees usually add up to 3% of the loan amount, and you’ll have to make a down payment of approximately 10%.

What makes this loan unique is that you must specify the use of the funds. This will determine your borrowing limit, as well as whether or not you are approved at all.

For example, if you use the loan to create jobs, you must create one job for every $65,000 borrowed. Manufacturing businesses must create one job for every $100,000 borrowed. Your borrowing limit will be $5 million.

If you use the loan for something related to public policy (i.e., business district revitalization, minority business development, expansion of women-owned businesses), your borrowing limit is $5.5 million.

Lastly, if you own a small manufacturing business, you must create or retain at least one job per $100,000 guaranteed by the SBA. Your loan must also be used for purposes related to public policy. If you meet these criteria, your borrowing limit will be $4 million.

The SBA Microloan

This product only gets its name from the size of the average SBA Loan. You can access up to $50K, with repayment terms of up to 6 years. Interest rates range from 8% – 13%. SBA’s Microloan product also carries no fees.

Economic Injury And Disaster Loans (EIDL)

This product was created for businesses that suffered physical damage from natural disasters, like floods or tornadoes.

You can borrow up to $2 million, your interest rate will be 3.75%, and the maximum term is 30 years. The first monthly payment will be deferred a full year from the date of the promissory note. There are no fees, including prepayment penalties, and collateral is not required.
Unlike most other SBA Loans, EIDLs cannot be accessed through banks and other third-party lenders. Instead, you must apply directly through the SBA’s website.

Before the CARES Act, eligible businesses had to prove that they were unable to obtain loans or credit from other sources and did not have enough cash or credit to cover operational expenses on their own. This requirement has since been waived. Thus, someone with an existing credit line could still theoretically be approved for an EIDL.

While EIDLs have traditionally only been available for registered entities (LLCs, corporations), they can now be accessed by sole proprietors, tribal businesses, cooperatives, and even independent contractors. One requirement that hasn’t changed is that EIDLs are only available for companies with up to 500 employees.

If you apply for an EIDL under $200,000, you can be approved without a personal guarantee.

SBA Loans – Research, Facts & Reports

#1. In 2019, the SBA approved 100,495 loans
#2. In 2019, these loans totaled 32.7 billion
#3. More than 50% of Americans either own or work for a small business. Small businesses create about 66% of new jobs in the U.S.annually.
#4. Research suggests that 70 percent of small businesses want loans of less than $250,000.
#5. On the financing front, credit demand held steady in 2018 (the most recent year for which data is available), with 43% of firms seeking external funds for their businesses.
#6. In the 2019 fiscal year, the Congressional Research Service reports the average SBA loan amount was $446,487.

Much of the appeal for SBA Loans come from their incomparably low interest rates. For many borrowers, interest is the most important factor they look for when shopping for business loans. Business term loans from banks carry low rates as well, but rarely as low as 5%. These two products are much cheaper than newer or alternative options. Short-term financing products, for example, can have APRs as high as 99%.

SBA Loans also carry very high borrowing limits and very long terms. If you use the loan for the right purpose, it can revolutionize your business. These are the kind of loans business owners pursue when they have significant investments on the horizon. Not only can you access the capital to afford your investment, but the low interest and low terms prevent you from damaging cash flow in the process. With more expensive products, you might have to cut expenses or put other plans on hold to make monthly payments. With SBA Loans, on the other hand, you’ll probably have no trouble making payments while covering operational costs. This also makes SBA Loans the ideal choice for businesses looking to maximize their ROI.

Anyone who has shopped for business loans knows that convenience comes with a cost. Since SBA Loans are as convenient and advantageous as it gets, they must, therefore, carry the strictest requirements.
Aspiring borrowers might assume that since the SBA guarantees a large percentage of the loan, SBA Loans should logistically be easier to access than Business Term Loans. From a rational standpoint, this should be true. But 85% is not 100%. The financial institution still stands to lose some money in the event of a default. Thus, they are only slightly more generous with SBA Loan applications. If you don’t think you’ll be approved for a traditional Business Term Loan, your chances of being approved for an SBA Loan are slim.

And remember, each institution creates its criteria for approval. This is another significant disadvantage of SBA Loans: the lack of concrete, universal requirements. Individual institutions might favor specific industries or types of businesses. For example, banks are notoriously biased towards established companies with massive bank balances.

Aspiring borrowers must be warned that applying for SBA Loans requires tremendous patience. Significant paperwork is often involved, and it could be at least three months before you learn whether or not you’ve been approved. Applicants might have to meet with multiple institutions before being accepted and may even be told to come back in a year when their finances have improved. The point is, SBA Loans usually aren’t as simple as filing one application to one institution and then getting your money a few days later.

Approved businesses generally met the following criteria:

ANNUAL REVENUE: $360K
CREDIT SCORE: 650+
TIME IN BUSINESS: 2 years+

JMJ Commercial has partnerships with selected SBA lenders. This allows us to approve and distribute loans in as little as three weeks. Here’s how to get started:

If you’re looking for long terms and the lowest possible interest rate, make sure you fulfill the general requirements with flying colors. Your credit score should be well over 650-700, and your cash flow should be highly consistent month-to-month. Depending on your borrowing amount.

Also, since SBA Loans are designed for large-scale investments, you should be able to support your desired investment with sufficient data. This is the only product where the funds’ purpose plays a considerable role, regardless of where you apply.

The application requires the following documents and information:

• • United States Driver’s license
• • Business license or certificate
• • Voided Business Check (for business bank account information)
• • Bank Statements
• • Credit Report/Statement of Personal Credit History
• • Business Tax Returns
• • Credit Card Processing Statements
• • Personal Tax Returns – 3 Years
• • Business Tax Returns – 3 Years
• • Business Plan (Not in all cases)
• • Personal Financial Statement
• • List of Real Estate Owned
• • Debt Schedule/Loan/Rent/Lease Documentation
• • Deeds/Title/Ownership documentation for any collateral/Security
• • Current Profit & Loss Statements and Balance Sheet Year-to-Date
• • A/R and A/P Reports
• • JMJ Commercial 1 Page Application

You can begin the application process by calling us or filling out our one-page online application. Either way, you’ll be asked to enter the information from the previous section along with your desired funding amount.

Once you apply, a representative will reach out to you to explain the repayment structure, rates, and terms of your available options. This way, you won’t have to worry about any surprises or hidden fees during repayment.

SBA Loans through our network generally take 3-5 weeks to process. Once you’re approved and your file is closed, funds should appear in your bank account in a few business days.

Your business loan isn’t just a way to get financing for your business. It’s also an excellent opportunity to start building (or improving) your credit.

Regardless of the type of business loan you get, make all of your required payments on time and in full. If you get a business credit line or another form of revolving credit, keep your balance below the credit limit.

Consistently making your business financing payments on time and in full will positively impact your credit. And that means preferred rates and terms when you next need business financing.

Due to the many requirements for approval, applications can get declined for a host of reasons. This also makes it easy for requirements to go overlooked. Thus, you should only apply if you are 100% certain about your institution’s requirements. You’ll probably have to contact the institution directly to obtain this information.

Thankfully, getting declined for an SBA Loan doesn’t mean you won’t qualify for other advantageous options. These products might not have the lowest rates or the highest borrowing amounts on the market. But in most cases, business growth takes a lot longer than expected. You might have to start with a standard Business Term Loan or Business Line of Credit. Creating a solid track record of timely payments can boost your credit score and prove your ability to make regular payments without damaging cash flow.

If you still have trouble qualifying for other options, we may recommend alternative business financing tools like business credit cards or even personal loans. Both are significantly easier to qualify for than business loans and can be accessed through JMJ COMMERCIAL . We often find that poor credit is what’s stopping business owners from obtaining financing. In this case, you should consider our credit repair services. We can help you boost your credit score by eliminating the issues keeping your score down.