Lendio matches entrepreneurs and small businesses with SBA loan lenders. When you choose to apply through Lendio, a wide variety of lenders receive your application, meaning you have more choices than just one lender.
What is an SBA loan?
The Small Business Administration (SBA) is a government agency dedicated to the success of small for-profit businesses in the U.S. The SBA is not in the lending business, but instead, they partner with traditional lenders, community development organizations, and micro-lenders to provide access to capital to small business owners. The SBA guarantees the loans made via the program and provides all the guidelines for their partners. Lendio can match your SBA loan application to lenders that partner with the SBA to provide loans.
What Are The Different SBA Loans Available?
The SBA offers different programs; all directed to help small businesses get the funding they need. The difference between the programs is what businesses can use the funds for. Some of the most common SBA loans are:
- SBA 7(a) Loan: This is one of the most flexible loans since you can the up to $5 million funds use it to buy land, cover construction costs, buy or expand an existing business, refinance debt or buy machinery, furniture, supplies, or materials.
- SBA 504 Loan: This loan is a bit more complicated, as it involves the approval of the project, and you need to cover a small percentage of the cost. You can this loan to fund projects like buying an existing building, building a new facility, or renovate an existing one, buy land or make land improvements, buy long-term machinery or refinance debt incurred through the expansion of your business or renovation of your facilities or equipment.
- SBA 504 Loan: Designed for businesses that need cash quickly, this type of loan application is reviewed within 36 hours; however, the funds can take up to 30 days. You can apply for up to $350,000 using SBA Express loans.
How You Can Use SBA Funds
You can use SBA money for any expenses you incur in your business’s day-to-day operations, like payroll, rent, utilities, inventory, equipment, and even buying a new business. The maximum for an SBA loan is $3,750,000 per individual, so if you borrow more than your immediate needs, you can bank the excess funds and use it as a credit line.
Paycheck protection program (PPP) loans are a new loan category the SBA developed to address Covid-related financial hardship.
Do You Qualify for a PPP Loan?
Paycheck protection program (PPP) loans are a new loan category the SBA developed to address Covid-related financial hardship. There are a few additional criteria you need to meet to qualify for a PPP loan. The basic premise of a PPP loan is to help you meet payroll and other fixed expenses if you need to close or curtail your business for a period of time.
- Your business was operating as of February 15, 2020
- You have fewer than 500 employees who are paid salaries and payroll taxes and or independent contractors you pay via Form 1099-Misc
- You are a sole proprietor, independent contractor, self-employed person, or business partner (one PPP application per business)
PPP loan amounts are calculated at 2.5X your overall monthly payroll costs, an amount that can also cover rent, utilities, mortgage, or other monthly expenses. If you have an existing SBA loan, you are still eligible for an additional PPP loan.
Who is Not Eligible for a PPP Loan?
Some businesses that appear to meet eligibility requirements for a PPP loan may not meet other requirements. If an applicant already has an SBA loan that is delinquent or defaults, for example, it will not be approved. Nor will any illegal business like gambling. Other disqualifying criteria are as follows:
- You are an owner with a 20% or greater stake in any kind of legal trouble, including incarceration, indictment, or felony conviction in the prior five years.
- You have more than 500 employees.
- You are applying to pay household employees (nannies, housekeepers, landscapers) out of loan funds.
How Do Lendio PPP Loans Work?
A PPP loan is a unique financial option designed solely for small businesses to stay afloat during the pandemic and keep employees on the payroll and off unemployment.
These are some highlights of a PPP loan.
- The interest rate is 1%.
- Before June 5, 2020, loans issued have a two-year maturity, and loans issued after that date have a five-year maturity.
- Borrowers do not need to offer collateral or a personal guarantee.
- Loans are fee-free.
- Payments are deferred up to 10 months after the maturity date.
- Loans are forgiven if you meet certain requirements. The primary requirement is that you keep your employees on the payroll.
Apply for a SBA or PPP Loan With Lendio
You can easily apply for a loan online with Lendio; this process takes about 15 minutes. Once they have received your application, Lendio will match you with the lenders partnering with the SBA to give you the options you have. If they need any additional documentation, Lendio will request it, and you can upload it using the online portal. There are no application fees or obligations on your part for applying. After choosing the lender and completing the paperwork, your funds will be available in your bank account in as little as 24 hours. Depending on specific circumstances, the whole process can take 1-2 weeks.
What Other Business Loan Options Do You Have?
If you don’t qualify for an SBA loan, Lendio can also help you find another type of loan that is right for your business:
- Business Lines of Credit
- Short-term loans
- Merchant Cash Advances
- Term Loans
- Equipment Financing
- Commercial Mortgages
- Accounts Receivable Financing
- Start-up Business Loans
- Business Acquisition Loans
Other Questions About PPP and SBA Loans
The SBA has different programs, so sometimes it’s hard to find answers to simple questions about their loan options. Here are some of the most frequent questions small business owners have about SBA loans.
Is there a quick turnaround for SBA disaster loan approval?
SBA disaster relief loans, or EIDLs, are available for small businesses, farms, and non-profits who can’t meet expenses due to a disaster like fire, flood, or other events and are limited to federally declared disaster areas. An EIDL loan’s turnaround is about 21 days, assuming all documents are submitted with the original application. The slow turnaround is worth it for many borrowers as the interest rate is 4%.
Can You check the Status of an SBA Loan?
When you apply for a Lendio SBA loan, you can log in to the SBA website to check your application’s status.
What Are the New PPP Rules?
The U.S. Treasury announced a second round of PPP funding in mid-January 2021, updating the original requirements. Now, loans can cover operating expenses, PPE equipment, and supplier costs. Also, seasonal employees can be covered in the new round. Qualifying PPP recipients can modify their original loan amounts, and some borrowers may be eligible for a Second Draw PPP Loan.
Do You Qualify for PPP Forgiveness?
The biggest selling point for a PPP loan is that the SBA is willing to forgive the debt if you meet the following criteria. Keeping in mind that the loan’s purpose is to keep your employees on the payroll, that’s pretty much it. Here are the specifics, based on the 8 to 24-week period following the PPP loan disbursement.
- You maintain employee and compensation levels.
- Loan proceeds are spent on eligible expenses.
- At least 60% of the loan proceeds are spent on payroll costs.
When Can You apply for PPP Forgiveness?
A PPP loan is unique in that the SBA fully expects to forgive the loan. You can apply for loan forgiveness as soon as your proceeds are depleted, any time up to the maturity date of the loan. Forgiveness eligibility expires 10 months after the maturity date, so for a loan you received in May 2020, you have until November 2022 to apply. After that date, borrowers begin making payments to their lender, as with any other loan.