Looking to grow your small business but need some help? The U.S. Small Business Administration (SBA) enables easier access to capital for business owners like you. How? By providing loan guarantees that reduce the risk lenders face.
You’ve likely heard a lot about SBA loan programs over the past year because of their active role in the COVID-19 pandemic relief efforts. While those are coming to an end, many other SBA loans will be up for grabs in 2022, including:
- 7(a) loans
- 504 loans
- SBA Express lines of credit
- SBA Veterans Advantage loans
- And more!
What SBA loans are available in 2022?
The SBA offers a full lineup of loan programs to help business owners in a variety of situations. While the disaster assistance programs offered during the pandemic have expired (or will expire soon), many others may work for you. Here’s everything you need to know.
The 7(a) loan program is the most popular of all the SBA’s programs. It offers loans with a maximum loan amount of $5 million to small businesses which can be used to:
- Buy or renovate real estate (land and buildings)
- Purchase supplies, equipment, machinery, materials, fixtures, and furniture
- Refinance other business loans/debt
- Access working capital for the short- or long-term
- Establish a new business
- Assist in the acquisition, expansion, or operation of a business
- Construct of a new building
Note, SBA’s 7(a) loans are split into two types. Loans of $350,000 or less are considered “Small 7(a) loans,” while those over $350,000 and up to $5 million are “Standard 7(a) loans.”
To qualify for a 7(a) loan, your business must operate for profit in the U.S. or its possessions. Additionally, you must use other financial resources before seeking assistance — including investing your own personal assets (must have skin in the game).
You also need to be able to show a financial need and a sound plan for the funds. Further, you can’t be delinquent on any existing debt obligation to the U.S. government.
The terms are often five to 10 years. However, real estate loans extend for 25 years. The SBA guarantees 85% of loans $150,000 or less and 75% of loans greater than $150,000, up to $3.75 million. That guarantee enables third-party lenders to extend loans to business owners with rates and terms that are better than market averages.
Certified Development Companies (CDC)/504 loans
The 504 loan program can help you get loans up to $5 million if you need to purchase major fixed assets for your small business.
For example, you can buy existing buildings or land, new facilities, and long-term equipment or machinery. You can also invest in the improvement of existing facilities or the modernization of utilities, streets, land, and parking lots.
However, there’s one caveat — those purchases need to enable job creation and business development.
To be eligible, you must be a for-profit company operating in the U.S. or its possessions. Your tangible net worth needs to be less than $15 million and your average net income for the past two years must be less than $5 million.
Learn more to find out if the 504 program is right for you.
These are long-term loans up to 25 years with fixed interest rates offered through what are known as Certified Development Companies (CDCs). CDCs are SBA-certified, nonprofit, community-based organizations that aim to revitalize their local areas.
Need a smaller loan, say, $50,000 or less? The Microloan program offers smaller loans that average $13,000. These are designed to help small businesses rebuild, enhance, re-open, or repair so they can grow. The funds can be used for purchasing equipment, machinery, inventory, fixtures, supplies, and more.
Intermediary lenders (approved community-based nonprofit organizations) set their own eligibility requirements, so you’ll need to check with them. You will typically need to have decent credit to provide a personal guarantee. and may also need to provide collateral.
The repayment terms for SBA microloans can extend as long as six years while interest rates typically fall between 8% and 13%.
SBA Express lines of credit (LOCs)
SBA Express LOCs are lines of credit up to $350,000 that are made available to qualifying small business owners.
The eligibility requirements for SBA Express LOCs are the same as for 7(a) loans.
The SBA Express LOC can revolve for up to 60 months, after which, a repayment term will begin which can last up to 60 months. Interest rates on loans of $50,000 or less will be the prime rate plus 6.5% while those over $50,000 will be the prime rate plus 4.5%.
SBA Veterans Advantage loans
The SBA Veterans Advantage Loans are designed to help veteran-owned businesses get the financing they need to grow. However, loan limits can vary depending on the loan type chosen. They can be processed as SBA Express LOCs up to $350,000 or 7(a) loans up to $5 million.
To qualify for this program, a small business owner with at least 51% ownership must be a veteran, National Guard member or reservist, active-duty military in TAP, or a spouse of one of the above. You can also qualify if you’re the widowed spouse of a veteran or service member who passed away during service.
The terms will be the same as for SBA Express LOCs or 7(a) loans except they have reduced or eliminated guaranty fees.
CapLines working capital loans
The CapLines program provides loans up to $5 million for construction contractors or homebuilders.
They can be used to finance the cost of specific contracts, subcontracts, and purchase orders (which can include overhead or general and administrative expenses).
The loan can come in the form of a contract loan, seasonal line of credit, builder’s line, or working capital line of credit.
To qualify, borrowers need to meet the 7(a) loan requirements and the additional requirements below which vary by loan type:
- Have the capacity and finances to complete the contract on time and with a profit
- Have the ability to bid and perform the work included in the contract
- Prove your ability to operate profitably on previous contracts
Seasonal line of credit
- Be able to show a pattern of seasonal activity
- Have at least one year in business
- Be a home builder or construction contractor
- Have managerial and technical ability
- Plan for renovations that are “prompt and significant”
- Demonstrate successful performance in bidding and completing a comparable project
Working capital line of credit
- Have inventory or generate accounts receivable
The loans mature in five to 10 years.
Community Advantage loans
Community Advantage (CA) is a pilot loan program aimed at serving small businesses in underserved markets. Community-based lenders offer SBA-backed loans up to $250,000 to qualifying business owners. This program is available until September 30, 2022.
The maximum loan amount for Community Advantage loans is $250,000. The proceeds can be used for a variety of expenses from buying or starting a business to paying off a loan or buying equipment. This one could be great for startup companies!
Same as 7(a) loans.
The maximum interest rate on these loans is equal to the prime rate + 6%.
International Trade loans
The International Trade loan program provides loans up to $5 million to help small business owners who want to enter, expand, or better compete in international markets.
The funds can be used by U.S. exporters and eligible foreign buyers to improve facilities and buy equipment. Further, they can be used as working capital and to refinance existing debt that has unfavorable terms.
To qualify, borrowers need to meet the same requirements as for an SBA 7(a) loan. Plus, if you’re an exporter, you’ll need to prove that the loan will help your business to expand/develop an export market or improve your competitive position. If you’re a foreign buyer, you’ll have to live in a country where it’s legal for the Export-Import Bank of the U.S. to provide financial assistance.
The SBA offers a 90% guaranty on the total loan amount. Terms vary from 10 years to 25 depending on how the loan is used. Interest rates range from 2.25% to 2.75% above the prime rate.
Export Working Capital program
If you need to fund export transactions from purchase orders to collections, this loan program provides advances up to $5 million for that purpose.
You can use the funds to pay for the cost of manufacturing goods, to purchase goods or services, to finance foreign accounts receivable, or to support Standby Letters of Credit that act as a performance bond or bid.
To find out if you’re eligible, it’s best to contact your local U.S. Export Assistance Center.
The term for these loans is typically one year or less.
Export Express loan
This expedited Export Express Loan offers loans and lines of credit of up to $500,000 to eligible business owners. You can use the funds for business purposes that enhance your company’s export development.
You must be a small business with at least one year in business. Plus, you need to prove the loan proceeds will support your export development activity.
The loan term cannot exceed seven years.
Coronavirus SBA disaster loan programs are ending in 2022
It’s currently looking like the COVID-19 relief SBA programs will NOT be available come 2022. The Payment Protection Program (PPP) officially ended on May 31, 2021, and the COVID-19 Economic Injury Disaster Loan (EIDL) program is set to close on December 31, 2021.
Paycheck Protection Program (PPP loans)
The PPP made almost $800 billion in forgivable loans available to over 8.5 million American small business owners who were impacted by the coronavirus.
The small business loans were disbursed over two rounds and most business owners could get up to 2.5x their average monthly payroll expenses, based on their 2019 and 2020 tax returns. Eligible borrowers included businesses with 500 or fewer employees along with independent contractors.
To be eligible for full forgiveness of the loans, at least 60% of the proceeds must’ve been spent on payroll costs. The other 40% could be spent on eligible non-payroll business expenses like mortgage payments, rent, and utilities. You also must’ve kept your employee headcount up and couldn’t have reduced their pay by more than 25%.
COVID-19 Economic Injury Disaster Loan (EIDL program)
EIDL loans offer American business owners low-interest, long-term loans up to $2 million. These aim to keep SMBs afloat despite losses due to the coronavirus pandemic.
Businesses can apply to receive a 30-year term with a fixed interest rate of 3.75%. However, you must use the funds to pay for regular operating expenses like payroll, utilities, and rent/mortgage. These loans are not forgivable and, again, EIDL applications are planned to close at the end of 2021.
While the Biden administration has extended both programs since the pandemic started, it doesn’t look like they will continue into next year. The good news? There are many other ongoing programs you can consider (found above)!
Get qualified for an SBA loan with Biz2Credit!
The SBA has many loan programs, but it doesn’t provide loans directly. Instead, you must find an SBA lender that is authorized to extend SBA loans. The SBA provides that lender with a guaranty promising they will pay a portion of your loan if you default. This lowers the risk for the lender, enabling them to extend you favorable rates and terms.
But where do you find an SBA lender? If one of these loan programs sounds like a good fit, Biz2Credit can help! We will connect you with the right SBA funder for your situation and can streamline the loan application process for you.
Get qualified for an SBA loan today!