Grow Your Business

Five Steps to Take Advantage of SBA Financing

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Small businesses are vital to the U.S. economy, and the U.S. Small Business Administration (SBA) provides capital access through a variety of financing programs. SBA programs often feature unique flexibility and terms that small businesses require.

As you consider SBA-backed financing, understand how the SBA evaluates applications and what programs they offer. Refine your capital plan so that it persuasively presents your needs and the results that financing will deliver.

An action plan for SBA loan programs

The following five steps allow you to assess your needs, identify potential SBA resources, and access the expertise and support available from SunTrust.

Step 1 - Commit to your goal: Improve, grow, restructure. Ground your views of your capital needs and financing options in a strategic review. A clear statement of your business’s plans is a prerequisite for securing financing. Block time away from the day-to-day demands of your business to think about its future plans:

  • Frame capital options around your overarching business strategy of improvement, growth or restructuring.
  • View your goals through an SBA lens: How does your business narrative match your capital needs? What impact will capital investment have on the future of your business?

Step 2 - Develop “What If” scenarios with a small group of trusted financial advisors, e.g., banker, CPA, CFO. Brainstorm the initiatives that you would pursue if you had greater access to capital.

  • Complete a back-of-the-envelope estimate of the financial impact of the best potential initiatives.
  • Ballpark your sources of cash so that you can understand the additional capital needed, the time horizon and the expected return on investment for each initiative.
  • Consider accessing local business resources to help you assess your strategic ideas and the capital needs/returns for each.

Step 3 - Assess your capital needs against SBA criteria. The SBA backs loans to businesses, not individuals, and considers a business’s plans to earn income, its ownership and its location. The SBA looks for:

  • Businesses with actively involved, experienced owners - borrowers with direct or strong transferrable industry experience, capable of creating and executing a successful business plan.
  • Business size and focus - “for profit” businesses with a solid business plan and the ability to demonstrate service of prior business debts.
  • Acceptable personal and business credit – personal liquidity must be within SBA standards and a personal guarantee is required for borrowers with greater than 20 percent ownership.
  • U.S.-based – only businesses operating in the United States or its possessions.
  • Demonstrated need for a sound business purpose – businesses must demonstrate their need for capital to fund growth or improvement and show the impact that a capital infusion will have on the business’s financials.

Step 4 - Match to the best SBA program. Ask your banker to review how each of the SBA loan programs compares to conventional sources of capital:

  • SBA 7(a) Program is the most popular and most flexible loan. It can be used for a wide variety of financing needs including goodwill (for restructuring ownership or acquisition). Loans up to $5 million are possible with down payments as low as 10 percent.
  • SBA 504 Program is typically used for commercial real estate and large equipment transactions. Both fixed and variable rates are available. Loans terms may extend up to twenty-five years. Capital plans that include two uses for capital (real estate and the other equipment, acquisition, etc.) can sometimes combine the 504 with the 7(a) to access greater amounts of capital.
  • SBA Express Programs are designed to provide both shorter-term working capital and asset needs with a streamlined process. The Export-Express program is designed for companies with existing exports or the goal to begin exporting to other countries.
  • SBA Specialty Programs include programs for disaster recovery loans and other special focus programs. 

Step 5 - Take advantage of SBA expertise and support provided by your banker. SunTrust is one of the nation’s largest originators of SBA loans and can help you as you select the best programs and proceed through the underwriting process.

  • Have a clear picture of the optimal financing package so you can find the most suitable SBA loan for your business.
  • Connect your SunTrust banker to your advisors and financial team so that they can efficiently assemble the documentation required for an application.

Get your Business in Position with SBA Lending

Ask your SunTrust Banker to connect you with our dedicated SBA team, or find out more here.

This content does not constitute legal, tax, accounting, financial or investment advice. You are encouraged to consult with competent legal, tax, accounting, financial or investment professionals based on your specific circumstances. We do not make any warranties as to accuracy or completeness of this information, do not endorse any third-party companies, products, or services described here, and take no liability for your use of this information.

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