Loan Guidelines


General Guidelines for SBA Loan Programs

Why lenders use SBA!

  1. Lack of/limited collateral
  2. Longer repayment term on loan than lender would normally provide
  3. Higher risk with either the borrower or the business proposal
  4. Lender's legal lending limit (usually smaller, more rural lenders affected)

General Comments & Misconceptions:

  1. US Citizenship – non-citizens can receive SBA guaranteed loans if they meet certain requirements
  2. Criminal record/activity – felons can receive SBA loans if they meet certain requirements
  3. Bankruptcy – former bankrupts can receive SBA loans if they meet certain requirements
  4. Refinancing of existing business debt – possible now w/i guidelines
  5. Size – 99% of all businesses nationally & in Iowa are considered small & therefore eligible by size
  6. Business plan – generally not required by SBA; may be/probably required by lender
  7. 100% financing – rarely available
  8. Lack of collateral as a reason for decline – cannot be sole reason
  9. Can make loans to farm & ag-related businesses including seasonal L/C

Legal Lending Limits:

  1. Generally – $2,000,000 total loan w/ $1,500,000 of it guaranteed by SBA
  2. Possible to have more than 1 SBA loan outstanding

Interest Rates:

  1. Negotiated between lender & applicant within SBA's maximums
  2. Can be fixed or variable depending on program used

Loan Money Can Be Used To:

  1. Start a business
  2. Purchase a business/change of ownership
  3. Expand a business
  4. Improve/strengthen a business

Processing Time:

  1. Less than 10 business days once application is complete (operative word)
  2. Shorter with some programs (can be 24 hours or less)

Use of Proceeds:

  1. Working capital
  2. Purchase of inventory
  3. Purchase of machinery & equipment
  4. Purchase of furniture & fixtures
  5. Purchase of land & building
  6. Building construction
  7. Building renovation
  8. Refinancing of existing business debt

Term of Loan – Linked to How Money is Being Used:

  1. Up to 7 years for W/C, inventory, & some equipment
  2. 7 - 10 years for most machinery & equipment, furniture & fixtures
  3. Up to 25 years for land & building or building construction
  4. If multiple use loan, will have "blended" term of loan

Factors Used in Making Credit Decision:

  1. Repayment ability
  2. Cash injection
  3. Management experience
  4. Collateral

Special Programs Available:

  1. International trade loans
  2. Lines of credit