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SBA Working Capital Loans: What Are They and How To Get Approved

Published September 13th, 2022 by Cornerstone Capital Advisors

Unfortunately, nearly 200,000 businesses shut down permanently during the pandemic's first year. So, if you're here, chances are your business needs an SBA Working Capital Loan. 

But with the right SBA loans, your MainStreet business can thrive. These loans aren't always quick to approve. But, with these expert steps, you can get the necessary working capital and equipment financing. 

So, read on to discover which small business loan is right for you. Together we can help your business overcome the economic disaster. 

According to H&R Block, sadly, "53% of black-owned businesses that last half their revenue." Black business owners should consider reading this article an essential investment. Because learning how to secure a ppl loan to pay employees can make all the difference.  

Understanding an SBA Capital Working Loan

Companies that employ less than 500 comprise "99.9% of America's businesses." This is why the U.S. Small Business Administration helps to protect these Main Street businesses with loans.

SBA loans are unique business loans by the U.S. Small Business administration. They provide working capital for businesses suffering economic or physical damage. 

A small business loan also applies to renters, homeowners, and businesses impacted by natural disasters. Of course, we can assist you with natural disaster loan services

SBA loans, like regular owner-occupied loans, can help homeowners remain in their residing homes. But unlike standard business loans, SBA loans come with extended repayment periods. 

Regular working capital loans, like for equipment financing, typically come with a ten-year repayment plan. However, SBA real estate loans might come with a 25-year repayment plan.  

SBA loans come in a wide array with different interest rates. We list the most common small business loans

  • 7a loans
  • PPP loans
  • SBA 504 loan
  • Microloans
  • EIDL loans

Of course, there are additional loans like economic and disaster SBA loans. In addition, CAPLines offer credit for small businesses that qualify. The U.S. Small Business Administration strongly supports the military. 

Businesses with employees leaving for active duty might qualify for a military SBA disaster loan. Also, military veterans can receive up to $350,000 with a Military Advantage SBA loan. 

7a Loans

SBA 7a loans come in two forms. The first type is the Standard 7a loan can reach up to $5 million. However, the guaranteed amounts differ. 

For loans worth up to $150,000, the SBA guarantees 85% of loans. For larger sums, the secured amount dips to 75%. Prepare to pay interest rates between 2.25% to 8%. 

The interest rate can be negotiated for SBA 7a loans under $350,000. Also, startups might be eligible for this small working capital loan. 

PPP Loans

PPP loans were a signature section of the Paycheck Protection Program. This working capital loan helped employers fund their payroll. Unfortunately, PPP loans are no longer issued.   

SBA 504 Loan 

Non-profit businesses aren't eligible for this business loan. The maximum a company can receive is $5 million. However, your company can't be worth more than $15 million to qualify. 

These loans can't work for working capital or paying off debt. 

Microloans

Microloan lenders can provide up to $50,000 in working capital. Non-profits benefit as well. Also, childcare centers can use it as a preschool loan or a daycare loan. 

Besides serving as a pre-school loan, Microloans favor certain startups. If the loan is $25,000 or less, no collateral is necessary. 

EIDL Loans

EIDL stands for "Economic Injury Disaster Loans." Most small businesses, agricultural companies, and non-profits are eligible. 

To qualify, your company must be in a declared disaster zone, such as a natural disaster. Your business must be able to document severe financial or economic hardship. 

The maximum for the SBA EIDL Loan is $2 million. In addition, EIDL loans have a 4% maximum interest rate. 

How to Apply for an SBA Work Capital Loan

Whatever small business loan you apply for, the funds don't come directly from the lender. Instead, the government works with lending institutions like community organizations. 

SBA doesn't guarantee 100% of the loan for the lending providers. The secured loan amount is around 85%. Borrowers can expect to have some form of collateral to secure this business loan. 

Consider these requirements for a working capital loan worth $350,000.

  • Credit score greater than 640
  • Two years of business tax returns
  • Free of tax liens

Your business should be bankruptcy-free for the past four years. The same is true for any repossessions. 

On the other hand, small SBA loans have favorable interest rates below 7%. The standard repayment period is ten years. 

If you choose to apply, prepare to wait at least a month. You can also view our small SBA loan page for more details. 

Larger SBA Work Capital Loans can reach $5 million. Like small SBA loans, these companies must not have any liens. In addition, your company must be bankruptcy-free for the past four years. 

Due to the more considerable sum, the lender requires in written form the purpose and usage of the funds. Your credit score can be no lower than 680. Expect also to have collateral to secure this business loan. 

Visit our page for more details about large SBA Working Capital Loan requirements. The interest rates vary based on the loan's size and payback period. 

SBA Working Capital Loan Forms

Most borrowers will fill out an SBA Form 1919. The principal borrowers fill out the company's financial details in this form. It also comes with basic questions to determine if you're eligible for the loan. 

The primary borrower fills out the first section of SBA Form 1919. Secondary borrowers fill out the second section. Lending institutions fill out SBA Form 1920 to secure the guaranteed portion of the loan. 

More on SBA Working Capital Loans

Other types of SBA loans include SBA Express, with a three-day turnaround. Your small business might also qualify for Export Working Capital. Export businesses can access $5 million worth of SBA Working Capital Loans. 

If you still have questions about SBA Working Capital Loans, don't hesitate to contact us. We have over 20 years of closing out business loans for our esteemed clients. Hopefully, you will be our next happy and thriving client.  


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