Maintain borrower eligibility with the Small Business Administration (SBA).
You must first satisfy the SBA’s fundamental loan criteria, which are as follows:
Assume the role of a for-profit company.
Location and operations in the United States
Owner-funded and owner-supported
First, look at other financing sources.
Meet the Small Business Administration’s (SBA) definition of a “small” business.
Work in an industry that has been authorized by the Small Business Administration.
In addition to these basic loan criteria, your company must satisfy the following SBA loan standards:
Excellent credit rating
A credit score of at least 640 is recommended, but the higher the better. If you’re applying for numerous SBA loans, you’ll almost certainly need a better credit score to demonstrate your lending eligibility.
Each loan’s collateral
If you fail on all of your debts, you won’t be able to utilize the same collateral. If you’re asking for several SBA loans, you’ll need to come up with unique collateral for each one, which may be tough to come up with.
Current debts are in good standing.
You won’t be able to obtain another SBA loan if your existing loan isn’t in good standing (s). Before applying for a new loan, be sure you’ve paid off all of your existing SBA (and non-SBA) obligations.
A strong business strategy
SBA lenders want to know how you intend to utilize the money. They want to examine your present and projected income and expenditures to evaluate whether you’ll be able to pay off several loans at once. Your business plan must persuade them that you have a plan in place to use the money to create enough profit to repay your debts.
Long-term success potential
Lenders must have faith in your ability to succeed in the short and long term. Because SBA loans may take decades to repay (up to 25 years), lenders will want to know that you’ll be around long enough to repay your loan.
Keep in mind that each lender will have their own set of criteria. In these situations, some lenders may have a policy against financing repeated SBA loans for companies, while others may be more lenient with your credit history. While the SBA has no specific years in business requirement, most lenders want companies to have been in operation for at least a few years before applying for an SBA loan.
The benefits and drawbacks of numerous SBA loans
The most apparent benefit of taking out several SBA loans is that you’ll be able to get some of the most inexpensive and flexible financing available. Loans don’t come much cheaper than SBA loans, so you’ll receive the finest rates and conditions possible.
Having numerous SBA loans, however, has a few drawbacks:
Long processes: Each SBA loan will need you to go through the same months-long application, approval, and financing procedure. They’ll save you money in the long run, but these loan procedures will cost you time.
Personal danger: Your personal assets may be seized if your company is unable to make monthly payments. If you’ve put up numerous assets as collateral for your loans, such as your house, savings, or cars, you may lose a lot of money.
Borrowing limit: Even if you have several loans, you are still subject to the SBA’s $5 million borrowing limit. While that’s a substantial sum of money, if you need more funds, you’ll need to look into other options.
Whatever your circumstances, it’s critical not to take on more debt than you can manage. Even if you qualify for numerous SBA loans, it doesn’t imply you should apply—other financing options or slower company development may be preferable.
Consult an accountant or your lender if you’re unsure how much debt is safe to take on. Do you want to do some math and calculate your monthly payment depending on a variety of loan amounts and terms? Take a look at our helpful SBA loan calculator.