How an SBA 7(a) Loan Can Help Your Small Business Thrive

Small Businesses make up over 99% of all U.S. firms. While that figure is quite impressive, owners often struggle to secure enough financing to grow their businesses when the time comes.

If you could use some help optimizing your cash flow and getting your company to the next level, consider applying for a Small Business Administration loan through City National Bank of Florida. Designed to provide funding to small businesses that might not qualify for conventional financing, this program allows you to invest in staff, inventory, marketing, equipment, and other working capital related expenses.

Read on to learn more about the benefits of SBA 7(a) loans and what you need to qualify.

What is An SBA 7(a) Loan?

The SBA7(a) Small Loan provides capital between $30,000 to $350,000 to eligible small business owners. These loans are the most commonly offered by the SBA, which guaranteed almost 52,000 of them in 2021, totaling $36.5 billion.

While these loans are typically issued by private lenders, they are partially backed by the SBA. This means businesses can access capital easily and makes it easier for small businesses to secure financing, invest in their operations, and maintain optimal cash flow.

5 Reasons Why You Should Apply

With affordable rates, longer repayment terms, and an easy-to-use online application, the SBA 7(a) Loan is often more accessible to small business owners than conventional financing programs. The minimum equity requirements at City National Bank of Florida and the access to support from a dedicated relationship manager also make the application process a little easier.

Here are five popular reasons the SBA 7(a) loan could be a good move for your business:

1. Lower down-payment requirements: One of the most significant benefits of SBA 7(a) Small Loans is they typically require a lower equity injection than conventional loans. In some cases, the down-payment requirement can be as low as 0% to 15% of the total loan amount. This can be a significant advantage for small businesses that may not have a large amount of cash on hand to make a substantial down payment.‍

2. Flexible repayment terms: Another benefit of SBA7(a) Loans is they often have longer repayment terms. This allows small businesses to structure their loan payments to match their cash flow. With longer amortizations, payments remain lower so that you can make smaller payments when business is slow and larger payments with additional capital during your busier months with stronger cash flow. This can help small businesses manage their cash flow more effectively and avoid defaulting on their loans. The average repayment terms are over a 10-year period versus the three-to five-year loan terms offered by conventional loans. "As a result, your monthly payments are lower, and more manageable," says Christina Ashby, SBA Loan Product Manager of City National Bank of Florida.‍

3. Fewer spending restrictions: Once you're approved for the funds, you are free to use them toward any eligible business expenses. This can include marketing, hiring staff, purchasing new equipment, purchasing inventory, or refinancing the debt you already have. “Normally, with conventional financing, more visibility would be required around how small business owners spend the funds due to collateral shortfalls," says Ashby. “With this program, borrowers have more flexibility to use the proceeds towards eligible business expenses even with a mixed use of the proceeds."‍

4. Lower interest rates: SBA 7(a) Loans also typically come with lower interest rates than conventional unsecured loans. This is because the SBA guarantees a portion of the loan, which reduces the risk to lenders. As a result, a private lender is better positioned to offer you lower interest rates. This can help you save money on interest payments over the life of the loan.‍

5. No collateral requirements: Many conventional loans require collateral, such as real estate or equipment, to secure the funds. However, SBA 7(a) Small Loans can still be approved with collateral shortfalls, as the SBA guarantees a portion of the loan. If you don't have a down payment or any significant assets to use as collateral, this feature can make a big difference in helping you get ahead.

How to Determine if You're Eligible

Ready to take the next step in growing your business? Here's what you need to know before you fill out your application for an SBA 7(a) Small Loan with City National Bank of Florida:

• You must be in business for at least two years and have operated a positive cash flow in the most recent tax year.

• You'll need acceptable personal credit with no major delinquencies or derogatory reporting.

• The tangible net worth of your business must be less than $15 million, with a maximum average net business income of under $5 million in the past two fiscal years.

• You must not have had any foreclosures or bankruptcies in the past five years.

• You must not be operating in certain industries, such as the cannabis industry, which is ineligible for federally-backed lending programs.

 As of April 2023. Eligibility requirements are subject to change.

‍How You Can Apply

You can prequalify for a business loan on City National Bank of Florida's online lending platform without any impact on your credit score. Follow the easy, three-step process below to apply for an SBA 7(a) loan:

1. Choose how much you want to borrow. This can be any amount between $30,000 and $350,000. Determining this will help you come up with your monthly payment over a 10-year loan. APR rate will vary.

2. Fill out some basic information about yourself and your business and, almost instantly, you can find out if you prequalify.

3. Complete your full application and upload the requested supporting documents. You can expect to hear back on a decision in a timely manner, with funding timelines between 30-45 days from application.

‍For more information on this promotional offer or to make an appointment, contact a

City National Bank of Florida representative online or call 833-448-6500.

Please note: The content in this article comes from individual opinions and experiences. The content should not be taken as advice coming from City National Bank of Florida. City National Bank of Florida does not offer tax, legal or accounting advice.

Sources:

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cdn.advocacy.sba.gov

sgp.fas.org

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