Discover flexible financing with SBA loans

As a small business owner, you’ve got advantages in adaptability and agility that larger businesses can’t match. But conventional loans might not be able to keep up with the flexibility and risk tolerance you need.

Large down payments and restrictions on use often rule out conventional financing, especially for buying out partners, funding goodwill, or making real estate purchases. To help support the growth of smaller businesses like yours, the Small Business Administration (SBA) guarantees loans with more flexible terms.

Understand SBA lending.

SBA loans aren’t government loans per se, but they are backed by the government, which means loans are issued by a bank or other lending institution and guaranteed by the SBA. The SBA sets loan guidelines allowing lenders to accept risks that would otherwise prevent a business from obtaining conventional loans. SBA 7(a) loans are multipurpose, while 504 loans are designed to finance owner-occupied properties.

Conventional financing typically requires collateral and down payments of 20% or more, specifies a single use for the funds, and limits goodwill financing. SBA loans are more flexible, covering a wide range of loans for different purposes, from real estate and equipment purchases to working capital and partner buyouts. SBA loans offer more attractive collateral terms and lower down payments as well.

SBA loans are a win-win proposition—financial institutions provide more loans, business owners get attractive financing, and the federal government stimulates the economy and creates employment opportunities.

When are SBA loans useful?

SBA loans are perfect for:

• Financing owner retirement – If you want to retire—whether through an outright sale or partner buyout—an SBA loan can make it happen. It allows the acquiring partner to put down just 10% of the deal value and finance the remaining 90%. Business valuation minimums are more flexible, and you can stay on for up to a year during the transition.
• Leveraging goodwill – The SBA recognizes goodwill as a financeable asset that can guarantee the long-term sustainability of your business.
• Acquiring real estate – The SBA 504 loan program can help you purchase the facilities your company needs. If your business requires real estate and equipment or funds for other capital needs, the 504 program can be combined with a 7(a) loan to help you access larger amounts of capital.
• Funding innovation – Most innovation requires investment in human capital, product development, or technology. Want to acquire a complementary or competitive business rather than building those capabilities organically? An SBA loan can help you there too by allowing you to move quickly on a purchase to expand your business.

SBA loan requirements

The documentation required for an SBA loan depends on how you plan to use the money.

An SBA 7(a) requires:

• A business plan or business summary with your financial projections
• An outline of your capital needs and what you’ll use it for, like ownership restructuring, business acquisition, equipment purchases, or working capital
• A projection of how the financing cost will affect your financials
• A timeline that demonstrates your ability to cover repayment and make interest payments
• A business valuation (for a business partner buyout)
• A description of how you’ll use additional funding to execute your business plans

An SBA 504 requires:

• A business plan or business summary with your financial projections
• An outline of your business goals, cost drivers, and how real estate investment will affect your bottom line
• The amount of required capital investment
• A financial projection that illustrates how you’ll pay back the cost of accessing capital in a reasonable amount of time
• A list of additional expenses associated with capital implementation, like moving costs, renovation expenses, rental charges, or changes to property taxes and insurance
• A statement of how financing will benefit your business over time