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How to Qualify for a Government Small Business Loan

Getting investments for your small business can be enormously difficult. But you have other options. In this guide, we’ll show you how to get a business loan from the government.

You own a small business and it’s successful. It’s been a couple years and you’ve applied to banks for a loan to help you expand.

Unfortunately, the bank says it’s too risky and turned you down. Now what? Time to consider a small business loan through the government.

Last year $30.5 billion in small business loans got approved and funded. Keep reading to find out how to get a business loan for your business.

What is a Government Business Loan?

These long-term, low-interest loans have funding through banks and lenders. The US Small Business Administration (SBA) makes them possible by guaranteeing the loan repayment.

The loan can help start a business, buy equipment, buy land, or expand. If a borrower defaults on the loan, the SBA pays the lender back.

How to Get a Business Loan

To apply for SBA funding, business owners must have a strong personal credit score. Aim to have a score of 680 or higher.

You need to have contributed personal time and money into the business. Then you need to show that you’ve tried to get financing elsewhere first.

Meet this rule by getting turned down at your local bank for a loan. The business needs to show that is profitable and in operation for years.

Only businesses operating for a profit qualify. Finally, the business needs to be physically located and operating in the US.

Your Loan Options

There are three main loan programs available to small businesses. Each loan program has slightly different qualifications.

SBA 7(a) Loans

This is the most popular program as the loans can fit a wide range of purposes. Many small business owners use this loan as working capital.

Borrowers can get approved for up to $5 million. Though the average loan amount is around $400,000.

These loans work like a standard loan we are all used to. The money borrowed gets paid back over a fixed period with interest.

504/CDC Loans

These loans are for those buying or upgrading commercial buildings. This includes real estate, warehouses, equipment, or heavy machinery.

There are three parties involved in these loans, the borrower, the bank, and the Certified Development Company (CDC). 50% of the loan receives funding from the bank.

40% of the loan gets funded by the SBA approved CDC. The remaining 10% is the borrower’s down payment.

Borrowers can get approval for up to $13 million. The approved amount depends on the industry and the number of jobs created.

Microloans

As the name applies, these are small loans of $5,000 to $50,000. Business owners of non-traditional businesses qualify for these loans.

These types of businesses could be a freelance company, a consulting business, or food truck. Banks will not lend to these young new businesses due to their increased risk.

Apply For Your Small Business Government Loan

Knowing how to get a business loan isn’t complicated, you just need to follow a checklist of items. Prepare your application so it includes all of the requirements for the loan you want.

Have your personal background and credit score. Include the business’s background and future plan. Include any financial statements, collateral, and legal documents.

Getting a business loan can take 4 to 12 weeks of work before approval. Both the bank and the SBA will need to approve your application.

Let us help you get started applying for your SBA loan.

Seedcopa

For over thirty years, Seedcopa has helped businesses get the money they need to start, grow and expand. We are proud that the loan programs we work with promote economic development.

Together with economic development partners throughout Pennsylvania, we help to grow local businesses, create and retain jobs and stimulate local communities.

Our team has over 75 years of combined government lending experience and a dedication to excellent customer service. After our initial assessment of your project, our commitment is to get you approved and closed.

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