SBA Loans

SBA loan is short for Small Business Administration loan—a U.S. government-backed loan program designed to give small businesses access to affordable financing.

Key points:

1. Who actually lends the money
   • The SBA itself does not make the loan.
   • Instead, the SBA guarantees a portion (often 50–90 %) of each loan made by approved banks, credit unions, or mission-based lenders.
2. Why it matters
   • Because of the federal guarantee, lenders face less risk and can therefore offer longer repayment terms, lower down-payments, and interest-rate caps that conventional business loans typically don’t provide.
3. Primary programs
   • 7(a) – The flagship program for working capital, equipment, real-estate, debt refinancing, or acquisitions (up to $5 million).
   • 504/CDC – Long-term, fixed-rate financing for major fixed assets such as owner-occupied real estate or heavy equipment.
   • Microloans – Up to $50,000 for smaller needs, delivered through nonprofit intermediaries.
   • Disaster loans – Direct low-interest loans from the SBA (not guaranteed by a third-party lender) to repair or replace property after a declared disaster.
4. Typical eligibility
   • For-profit U.S. business.
   • Meet the SBA’s size standards for its industry.
   • Demonstrate inability to obtain reasonably priced non-SBA credit.
   • Adequate credit history and the ability to repay.
   • Owners owning ≥20 % must provide a personal guarantee and, in most cases, collateral.
5. Use of proceeds
   • Working capital, inventory, equipment, commercial real-estate purchase, construction, renovation, business acquisition, or refinancing existing business debt.
6. Loan size & terms
   • Maximums: $5 million for standard 7(a), $500 k for SBA Express, $5 million for 504 CDC projects, and up to $50 k for microloans.
   • Maturities: 5–10 years for working capital/equipment; up to 25 years for real estate.
   • Interest rates: Negotiated between lender and borrower, but subject to SBA maximums tied to the prime rate.

Bottom line: An SBA loan is a government-guaranteed, bank-issued loan that makes long-term, low-down-payment financing available to qualifying small businesses for almost any legitimate business purpose.

Advantages of SBA Loans

• Very low, government-capped interest rates
• Long repayment terms—up to 10 years for working capital, 25 years for real estate—keeping monthly payments small
• Down payments as low as 10 %; collateral gaps covered by the SBA guarantee
• Easier approval for borrowers with limited credit history or thin collateral
• Loan sizes from micro-level ($500) to multi-million-dollar packages
• Funds usable for almost any business purpose: expansion, equipment, inventory, refinancing, partner buy-outs, etc.
• Free mentoring, counseling, and educational resources bundled with the loan
• Fully amortizing structure with no balloon payments and minimal or no prepayment penalties

SBA Loan Case Study (names, details changed for privacy protection)
“Rolling Thunder Brewing” Uses an SBA 7(a) Loan to Capture a Once-in-a-Decade Expansion Opportunity

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1. Snapshot of the Business

• Name: Rolling Thunder Brewing Co. (R.T.B.)
• Location: Asheville, NC craft-beer corridor
• Age: 6 years; 15-barrel brewhouse + taproom
• FY-2024 Revenue: $1.9 M
• FY-2024 EBITDA: $285 k (15 %)
• Owners: Marcus & Elena Hill (100 % equity)
• Current debt: $75 k equipment lease (2 yrs left)
• Growth obstacle: Taproom at capacity every weekend; demand for cans outstrips brewing volume 2:1

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2. The Time-Sensitive Opportunity
   March 2025: A 12,000 sq ft former textile mill two blocks away hits the market.

• Asking price: $1.2 M (includes 8,000 sq ft warehouse + 4,000 sq ft conditioned space)
• City incentives: $200 k façade grant + 5-year property-tax abatement if occupancy begins by December 2025
• Potential impact:
  – Add 30-barrel production line (triple capacity)
  – Install 500-person beer hall (taproom + event space)
  – Projected incremental revenue Year 1: $1.1 M; Year 3: $2.4 M

Catch: Offer deadline is April 10, 2025; Marcus needs financing commitment in hand to compete with cash buyers.

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3. SBA 7(a) Loan Structure
   Lender: Mountain Community Bank (Preferred SBA Lender status)
   Total Project Cost: $1.65 M
   – Real-estate purchase: $1.2 M
   – Renovations & build-out: $350 k (cold room, canning line, taproom finishes)
   – Soft costs & closing: $100 k

Financing Mix

• SBA 7(a) Loan: $1.485 M (90 % of project)
• Owner Cash Injection: $165 k (Marcus & Elena liquidate personal brokerage account)

Loan Terms

• Interest Rate: WSJ Prime + 2.75 % = 8.5 % fixed (as of March 2025)
• Amortization: 25 years (real-estate component) blended with 10-year equipment component
• Monthly Payment: ≈ $11,850
• No balloon; fully amortizing
• SBA guarantee fee (2 % of guaranteed portion) financed into the loan

Timeline

• March 15: Preliminary approval and SBA Authorization issued
• April 5: Appraisal & environmental reports complete
• April 8: Commitment letter presented to seller → accepted over competing cash offer contingent on 45-day close
• May 15: Closing & funding → title transfers to RTB

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4. Execution & Outcomes (Year 1 Post-Closing)

Cap-Ex Timeline

• May–July: Renovations & equipment installation
• August: 30-barrel system online
• September: Grand-opening of new beer hall; first cans hit regional grocery shelves

Financial Results (Pro-forma vs. Actual Year 1)

• Combined Revenue: $3.2 M (projection $3.0 M)
• EBITDA: $640 k (20 %)
• Debt-Service-Coverage Ratio: 2.1× (comfortably above banker covenant of 1.25×)
• Net cash after debt service: $275 k—enough to begin paying down the equipment lease early

Qualitative Wins

• 8 new full-time jobs created (brewers, servers, events manager)
• Brewery tours now offered 7 days a week → additional $60 k ancillary revenue
• Brand visibility doubles; RTB cans placed in 120 grocery stores vs. 45 pre-expansion

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5. Reflection – Why the SBA Route Worked
6. Below-market rate saved ≈ 4–5 % vs. conventional commercial real-estate loan.
7. 25-year amortization kept monthly payment <1 % of new revenue—critical during ramp-up months.
8. 90 % financing let owners conserve cash for unexpected build-overruns (electrical, city inspection).
9. Speed & certainty: Preferred Lender status closed in 60 days, beating other bidders.
10. Added value: Bank paired RTB with the local Small Business Development Center for HR and marketing plans at no cost.

Bottom Line
The SBA 7(a) loan transformed a competitive real-estate purchase into an immediately cash-flow-positive expansion that tripled brewing capacity and doubled revenue—without diluting ownership or strangling cash flow.

Use shorter-period business financing as a runway, not a destination.

1. Choose the right short-term tool
   Revenue-Based Financing is usually the cleanest: 3–18-month term, payments flex with sales, no personal guarantee. An equipment lease works if the asset itself secures the note. Treat MCA only as an overnight band-aid you can rip off within 90 days.
2. Borrow only what the SBA will later refinance
   Cap the advance at 2–4× monthly gross revenue; that keeps the payoff bite-sized when the 7(a) funds. Make sure the lender marks the note “short-term bridge—refinance intended.”
3. Document everything in real time
   While the money is active, upload every bank statement, lease agreement, and payment receipt to the same cloud folder you’ll hand the SBA lender. The goal is zero detective work later.
4. Guard the three SBA gatekeepers

• Credit: pay each short-term installment early; the on-time history lifts personal and business scores.
• Cash-flow: route all repayment through the business operating account so the debt-service calculation is crystal-clear.
• Collateral: refuse blanket UCC filings on all assets; limit liens to the specific equipment or receivables the short-term lender actually financed.

Time the exit before you draw the first dollar
Write the payoff date on the calendar the moment the funds hit. Line up an SBA Preferred Lender, keep the teaser package updated, and schedule the appraisal the same week the bridge closes. When the short-term note matures, the SBA loan steps in and retires it—no stacking, no headaches, no questions.

BusinessMoney.broker acts like a one-stop staging area: it lines up the short-term capital you need today, while quietly engineering the credit profile and repayment record that tomorrow’s SBA lender wants to see.

1. Instant short-term offers
   You complete a single digital intake. The marketplace returns Revenue-Based Loans or Advancesll, equipment leases, and 3- to 12-month lines of credit in minutes. These products are chosen because they can legally be paid off with the proceeds of a future 7(a) or 504 loan.
2. Bridge-to-SBA underwriting rules
   Every quote is tagged with an SBA-compatibility flag:

• no prepayment penalties
• no blanket UCC lien on all assets
• optional 30-day “clean-up” periods so the file shows a zero balance before the SBA loan closes.

1. Credit-building layer
   BusinessMoney.broker simultaneously opens tier-1 vendor tradelines (fuel cards, office supplies, software subscriptions) that report to Dun & Bradstreet and Experian Business. Each on-time payment thickens the business credit file, directly improving the SBA’s “creditworthiness” score.
2. Cash-flow calibration
   The platform pushes daily or weekly repayment data to QuickBooks/Xero. After 90–120 days you have a live debt-service-coverage ratio that proves to the SBA lender you can handle a 10-year amortization.
3. Hand-off to the SBA desk
   Once the short-term note is seasoned, BusinessMoney.broker’s Preferred SBA channel pulls the same data pack:

• 12-month repayment history
• verified revenue trend
• cleaned-up collateral schedule
  The SBA loan is pre-approved in days instead of weeks, and the short-term balance is retired at closing—no stacking, no cash-flow crunch.

In short, the platform uses today’s shorter-term financing as a credit-building bridge that ends with you walking into an SBA loan already looking bankable.