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Better Understand SBA Lending - 3 Questions & Answers

Posted on April 15, 2019

What are the differences between an SBA loan and other types of small business financing?

An SBA loan offers:

  • Lower loan payments
  • Lower down payments
  • More flexibility concerning collateral
  • Max interest rate allowance
  • Confidence knowing the bank is with you for the long haul


What are the eligibility rules for SBA lending?

Some of the eligibility rules are obvious:

  • U.S. citizenship or you must be a legal alien
  • The business must be defined as a “small” business
  • Good credit history
  • The loan must support economic growth


But, there are some that are less apparent:

  • The borrower has never caused a loss to the federal government on any other loans
  • The business must be for-profit
  • The business must occupy between 51% and 60% of the building for real estate loans
  • The business industry matters – not all industries qualify
  • The principals must not have a criminal record


It is best to talk to the bank first to determine your eligibility for the program before getting started.


What can businesses use SBA loans for?

  • Purchase, construction or renovation of a new building
  • Purchase fixtures, furniture or equipment
  • Acquire a business especially when a significant portion of the value is goodwill
  • Startup costs for new businesses including franchises, medical, dental and veterinary practices
  • Working capital to buy inventory or finance growth and expansion
  • Refinance existing loans when it makes sense for the business


There are pros and cons to going with an SBA loan, but we make certain our borrowers are fully aware of all the specific pros and cons of every loan option available so that an informed decision can be made. We work together with the SBA to help business owners start, expand and grow their businesses.

The SBA program is an excellent tool for banks to use when helping businesses cross the bridge from where they are today to where they want to be tomorrow. If you have an interest in this product or would like additional information contact Kevin Kilpatrick.

Kevin Kilpatrick

Kevin Kilpatrick

Kevin Kilpatrick is Senior Vice President of GCap Financing, a division of Peoples Bank of Alabama. Kevin has 33 years of banking experience which has taught him that borrowers need more than a good idea to be successful. The most successful business leaders surround themselves with the best team of advisors they can find. Kevin’s knowledge of SBA, USDA and other loan products qualifies him to be a valuable advisor to his customers for financing requests between $50,000 to $10,000,000 for the purchase real estate, equipment, business acquisition, startup and franchises, refinancing existing debt and to provide working capital. Kevin may be reached by filling out this contact form.