An SBA commercial loan is one that is provided through a standard lender, but is backed up by the federal government through the SBA, or Small Business Administration. These loans are particularly popular among lenders, thus increasing a business’s chance that it will actually obtain funding from a lender.
In order to get an SBA commercial loan, a small business first needs to sign an application and then send it in. In order to qualify:
1. The business needs to be fairly small.
2. The applicant needs to have invested some capital into the business—if they don’t themselves have stake in the company, the SBA won’t fund it.
3. The better the credit score, the better the loan. The circumstances are different, but usually an applicant with a credit score under 620 won’t receive SBA backing.
4. The business must be able to show that it is viable through a strong business plan. If the business isn’t likely to succeed, there is no reason to fund it.
Most SBA applications get turned down for a number of reasons. One of the main reasons is that the government recognizes that the amount of money the applicant is asking for won’t be enough to actually produce success in the area they are working in. Many applicants will only ask for a few thousand dollars on their SBA commercial loan. However, a few thousand dollars is rarely going to be enough for a business to actually be successful, and that is the goal of the SBA from the first.
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