SBA Loan Requirements & Eligibility

Both the SBA 7a Small, 7a Large and 504 loan programs can be used to fund owner-occupied commercial real estate. This includes projects that involve the purchase or refinancing of an existing building. The operating company must occupy and actively use 51% or more of the property, and then may lease the rest of the property to a third party. 

SBA 7a Small, 7a Large, and International Trade loans offer guaranteed loans that can be used to construct owner-occupied real estate, or fund an expansion of your current owner-occupied facility. The SBA 504 loan program only provides take-out financing, but can be used to follow a conventional construction loan for this purpose. This will typically require additional collateral to be pledged until the SBA take-out is achieved. The construction project must:

• Initially occupy and actively use 60% or more of the rentable square footage
• Intend to occupy additional space within 3 years, and at least 80% within 10 years

The bank and SBA generally do not allow self-construction (where borrower acts as the general contractor)

The SBA 7a Small and 7a Large loan programs can be used to fund tenant improvements in a leased space, however very specific rules must be followed, such as:

• Landlord must be willing to assign the lease rights to the bank, and subordinated lessor interests in collateral to the bank
• Lease term but equal or exceed term of loan
• Additional collateral is usually required

The International Trade, Working Capital CAPline and the Export Express loan programs can be used to finance most of a business’ needs relating to exports, whether those are products or services. The International Trade loan can be used to fund equipment, fixed assets, owner-occupied real estate, or permanent working capital and inventory for an exporter. The Working Capital CAPline can include foreign accounts receivable and export inventory in the borrowing base, but rules apply. Please contact one of our bankers for more information about the export rules for Working Capital CAPlines. Finally, the Export Express program can be used to finance the temporary working capital needs relating to timing gaps between paying for goods or labor and getting paid by the client (up to $500,000).

The SBA 7a Small, and 7a Large loan programs can be used to support the purchase of a business or the buyout of a partner. However, the buyer(s) must end up with 100% of the business, and the seller(s) must exit the business. You must have a business plan or projections, if you need help creating these, please contact one of our SBA experts.

The SBA 7a Small, and 7a Large loan programs can fund the purchase of vehicles, furniture and other equipment actively used in the business. 

Both the SBA 7a Small, 7a Large, and 504 loan programs can be used to purchase manufacturing and capital equipment. These are machinery and equipment with a useful life of at least 10 years which is typically affixed to real estate. It does not include any kind of rolling stock.

The SBA 7a Small, and 7a Large loan programs may be used for general business expansion (new location or territory). Uses include hiring associates, purchasing inventory and equipment, or completing leasehold improvements.

The SBA 7a Small, 7a Large and 504 (if owner-occupied real estate is being refinanced) can be used to refinance business debt. To be eligible, the existing debt must be on unreasonable terms, such as:

• High interest rates
• Balloon payments or demand structures
• Term much shorter than useful life of asset financed
• Business credit cards
• Typically cannot be at the same bank
• No personal credit cards or personal loans

Requires that the bank takes the same collateral and guarantees, and the existing loan must have been used for an eligible business purpose.

Have higher client concentrations, need higher advance rates, or have higher leverage but haven’t been in business long? The SBAExpress, Export Express, and Working Capital CAPlines can be used to provide lines of credit to support temporary fluctuations in accounts receivable and inventory. Typically, up to 80% of eligible accounts and up to 50% of eligible inventory is allowed to be financed and can include foreign accounts receivable and government receivables. 

The SBA 7a Small or 7a Large loan programs allow the bank to underwrite independent and franchise businesses less than two years old. The borrower should be prepared for 25% or more equity and provide sufficient collateral to support the full request, and owners must have strong experience running a similar business and strong credit and outside sources of income. You must have a business plan or projections, if you need help creating these, please contact one of our SBA experts.