logo Login
open
What is an SBA loan?
x
What is an SBA loan?

SBA is an acronym for the Small Business Administration. The SBA provides opportunities for banks to partner with them to give businesses loans that the bank might otherwise consider to be too risky. In some situations, the bank can get a partial loan default guarantee from the SBA. In other deals, the SBA will actually issue a debenture to allow for a company to borrow money against a fixed asset for 10 to 20 years at a fixed rate of interest while being in a second lien position vis-à-vis the financial institution.

open
What can I use SBA loan funds for?
x
What can I use SBA loan funds for?

Typically, the SBA finances the acquisition of assets for a company. A company can also qualify for the SBA 7a loan guarantee program if the refinancing of debt will help the company save money through either the lowering of interest costs or the extension of the initial loan amortization. Congress and the President recently passed legislation that allows for the SBA 504 program (the program the provides for fixed rate debentures) to not only be used for the acquisition of assets but also the refinancing of debt (however, there are still many issued to be resolved with exactly how this program will work).

open
What are the different types / variations of SBA loans?
x
What are the different types / variations of SBA loans?

The SBA provides two types of loan programs: 

Loan Guarantee Programs
The SBA loan guarantee programs wherein the SBA will provide a bank with a loan default guarantee whereby they compensate the bank for up to 85% of the amount of money that a bank may not be able to collect in a default situation. 

504 Program 
The SBA 504 program whereby the SBA provides a second loan in conjunction with financing from a bank for the acquisition of assets.

open
Are there any industries not eligible for SBA loans?
x
Are there any industries not eligible for SBA loans?
  • Financial businesses primarily engaged in the business of lending, such as banks, finance companies, payday lenders, some leasing companies and factors (pawn shops, although engaged in lending, may qualify in some circumstances)
     
  • Businesses owned by developers and landlords that do not actively use or occupy the assets acquired or improved with the loan proceeds (except when the property is leased to the business at zero profit for the property’s owners)
     
  • Life insurance companies
     
  • Businesses located in a foreign country (businesses in the U.S. owned by aliens may qualify)
     
  • Businesses engaged in pyramid sale distribution plans, where a participant's primary incentive is based on the sales made by an ever-increasing number of participants
     
  • Businesses deriving more than one-third of gross annual revenue from legal gambling activities
     
  • Businesses engaged in any illegal activity
     
  • Private clubs and businesses that limit the number of memberships for reasons other than capacity
     
  • Government-owned entities
     
  • Businesses principally engaged in teaching, instructing, counseling or indoctrinating religion or religious beliefs, whether in a religious or secular setting
     
  • Consumer and marketing cooperatives (producer cooperatives are eligible) - Loan packagers earning more than one third of their gross annual revenue from packaging SBA loans
     
  • Businesses in which the lender or CDC, or any of its associates owns an equity interest
     
  • Businesses that present live performances of an indecent sexual nature or derive directly or indirectly more 2.5 percent of gross revenue through the sale of products or services, or the presentation of any depictions or displays, of an indecent sexual nature
     
  • Businesses primarily engaged in political or lobbying activities - Speculative businesses (such as oil exploration)
open
Can businesses get additional SBA loans after they’ve already acquired one previously?
x
Can businesses get additional SBA loans after they’ve already acquired one previously?

Yes, so long as they meet the other criteria such as amount guaranteed.

open
Why would a business pursue an SBA loan over a typical commercial term loan or line of credit?
x
Why would a business pursue an SBA loan over a typical commercial term loan or line of credit?

In some situations, the bank will not provide financings without an SBA guarantee or SBA loan. In other situations, it is beneficial to the client to have financing that is backed by the SBA as the bank may be able to provide more favorable financing terms.

open
What are the eligibility requirements for a SBA loan?
x
What are the eligibility requirements for a SBA loan?
  • Operate for profit
  • Be small, as defined by SBA
  • Be engaged in, or propose to do business in, the United States or its possessions
  • Have reasonable invested equity
  • Use alternative financial resources, including personal assets, before seeking financial assistance
  • Be able to demonstrate a need for the loan proceeds
  • Use the funds for a sound business purpose
  • Not be delinquent on any existing debt obligations to the U.S. government
open
Where would I find current SBA loan interest rates?
x
Where would I find current SBA loan interest rates?

Any of our MutualBank Commercial/Business bankers can provide those terms and rates.

open
What are the business insurance requirements to apply for a SBA loan?
x
What are the business insurance requirements to apply for a SBA loan?

The same as any conventional bank financing. See more explanation here.

open
Is collateral required to secure a SBA loan?
x
Is collateral required to secure a SBA loan?

Yes, the SBA will always ask that the bank secure collateral whenever possible.

Page 1 of 2First   Previous   [1]  2  Next   Last   

 

 

These questions and answers are provided for general information only and may not be completely accurate in every situation. The information provided is not legally binding on MutualBank or any of its affiliates or subsidiaries. For assistance with specific questions regarding your account(s), please contact us.

ALL YOU NEED TO KNOW

Frequently Asked Questions

 

 

Back To Top

questionmark sign - Mutual BankNeed Help?