SBA Loans are complex, intricate, and require due diligence. They are also an excellent resource for businesses looking to grow. Here at First Commonwealth, we have a dedicated team who understands the ins and outs of the Small Business Administration (SBA) loan programs. Below they have taken the time to answer some frequently asked SBA questions.

I need several million dollars. Can an SBA loan finance that level of capital?

 Yes. With the two programs offered at First Commonwealth FCU, the SBA 7(a) and SBA 504, you can get up to 5 million and 5.5 million dollars respectively.  

How can I use the SBA 7(a) program?

The SBA 7(a) program is the most common SBA program. Program uses include:

  • Short and long-term working capital. Help with your day-to-day expenses
  • Refinance current business debt
  • Purchase furniture, fixtures, equipment, inventory or machinery. Help to improve your company’s efficiency.
  • The construction a new building or renovation of an existing building.
  • Establishing a new business.
  • Assisting in the acquisition, operation or expansion of an existing business.

How can I use the SBA 504 program?

The SBA 504 program is designed primarily for real-estate and equipment financing, not day-to-day operations. Typical uses of these funds include:

  • Purchase of new buildings, land, facilities or long-term machinery
  • Modernization of business facilities

What’s the difference between SBA 7(a) and SBA 504?

The biggest difference between the two programs is that the 7(a) program can be used for day-to-day operations while the 504 cannot. Interest rates between the two programs vary. When you work with the FCFCU small business team, you will get to the best solution for your specific business goals and situation.

Is every business accepted to receive SBA financing?

No, your business could be rejected for an SBA loan if your entity is missing out on some key components.

  1. Poor Credit History – One of the largest contributing factors when it comes to SBA loan rejection is poor credit history. The SBA uses the FICO Small Business Scoring Service (SBSS) when evaluating 7(a) loan applicants. SBSS is calculated using the business owner’s credit bureau data, financial figures, and other factors to produce a number between 0 and 300. with a current minimum score of 155 needed for loans up to $350,000. 504 Loans rely on credit score and business cashflow.
  1. A lack of collateral – Your collateral provides security to the lender when it comes to getting a loan. Our team will review what collateral is necessary when opening an SBA loan.
  2. Lack of Profitability – For a loan to be repaid, the business must become profitable to pay off the loan within the fixed time frame. Failing to demonstrate profitability could lead you to being unable to open an SBA loan.
  3. Ineligible business type: Most, but not all businesses are able to be funded via the SBA. A few organization ineligible for SBA loans include: religious institutions, nonprofits, and real estate investment firms.
  4. Too Much Debt – Many businesses operate with debt, but at a certain level, the risk becomes too high for the lender to bet on. With too much debt, you may be rejected for the SBA Loan.

 I’m afraid my business is too large to receive an SBA Loan. What should I do?

Meet with our expert team. The size of the business for an SBA loan is determined by industry according to the Small Business Administration. Our SBA team will go over your financials, asset size, credit history and more when reviewing your organization to see if you qualify for an SBA loan.

What documentation do I need for an SBA Loan? 

There are some key documentation components that make your path towards getting an SBA loan easier while at the same time cutting down the steps you need to take to secure the loan.

A Business Plan – By laying out clear facts, figures, and financial projections about your organization, you can present a succinct overview of your business model, cutting down on the time needed to scramble for to secure the proper financing.

Personal and business financial statements – Including personal and business assets, cashflow, net worth, and balance sheets.

Income Tax Returns – Typically you need to provide your personal and business income tax reports for the past three years.

Legal Documents- Business licenses and permits, articles of incorporation, and any operating agreements, lease agreements, or partnership agreements are needed to support your application.

Collateral documents – paperwork showing an accurate representation of the asset and its market value.

How long does it take to get an SBA Loan?

SBA loans are known for their low down payments, low rates, and excellent financing, not for their speed. The application process is expedited thanks to the First Commonwealth team, with the approval process from the Small Business Administration taking the bulk of the time.

How do I apply for an SBA loan?

You work with the SBA experts at First Commonwealth FCU. Schedule an appointment today and we’ll get you started. SBA financing is complex, but so is running a successful business. With our team of SBA professionals, you can focus on what really matters – running a successful business and let us do the heavy lifting preparing your application.

Meet with An Expert