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Updated on Friday, January 22, 2016
The information related to the Chase SBA loan has been collected by MagnifyMoney and has not been reviewed or provided by the issuer of this card prior to publication.
If you’re shopping for a small business loan, Chase offers two products, the Chase Business Term Loan and the Chase Small Business Administration (SBA) Loan. The Chase Business Term Loan is like any other typical small business loan offered by a bank.
The Chase SBA loan is a little different. If you meet eligibility criteria, part of the loan Chase issues to you is guaranteed by the SBA. Lenders assume less risk when the government backs a loan. As a result, SBA loans may have higher borrowing limits, longer loan terms, and lower down payments than other small business loans.
Here we’ll cover both Chase loan options in more detail.
Chase Business Term Loan
The Chase Business Term Loan has terms from 12 to 84 months. The least amount you can borrow is $5,000. Chase doesn’t publicize interest rates or fees for its small business loans. You have to call into a local branch and give a loan agent your business specs to shop for rates.
For an example, we reached out to Chase requesting a $10,000 loan to buy office equipment for a consulting business. We were quoted 5 to 8% APR, with no down payment and a $75 closing fee. According to the Chase representative, closing costs are determined using a tier system based on business volatility. An unpredictable business like a restaurant is given a higher closing fee. Once approved for the $10,000 loan, we could expect funds to be disbursed into our bank account within a week.
Chase considers factors like the type of business you have, your credit history, tax returns, and cash flow to approve you for the Business Term Loan.
Chase SBA Financing
There are a few types of Chase SBA loans, but the SBA 7(a) loan is the one most commonly used by business owners to expand a business or manage cash flow. The Chase SBA 7(a) loan has fixed and variable interest rate options. SBA loan rates are competitive because there’s a limit on how much lenders can charge in interest. You can borrow up to $5 million.
The Small Business Administration will guarantee up to 75% of the Chase SBA loan (with a $3.75 million cap). Loan terms are available for up to 25 years depending on how you plan to use the funds.
Here’s the breakdown of available terms:
- Up to 7 years for working capital (i.e. day-to-day operations)
- Up to 10 years for equipment
- Up to 25 years for real estate
Applying for a Chase Small Business Loan
You have to apply at a branch whether you choose the Chase Business Term Loan or Chase SBA Loan.
Of course, the SBA loan application process is longer and much more involved since it’s part of a government program. You have to get approved by Chase and meet Small Business Administration requirements. At the very least, to get approved for an SBA loan, you must:
- Meet the business size criteria set by SBA
- Be a for-profit business
- Do business in the U.S.
- Have reasonable invested equity in your business
- Be able to prove a need
- Use the funds for sound purposes
- Not be delinquent on other government loans
- Use other resources, like your own cash, before seeking help
There are several more requirements necessary to qualify for an SBA loan. For a full list visit the Small Business Administration website.
Fees and Gotchas
As mentioned, Chase charges a closing fee. But there’s no prepayment penalty if you pay the loan off early. If you get approved for a Chase SBA loan, you may also have to pay a guarantee fee if you borrow more than $150,000. The guarantee fee is between 0.25 to 3.5% depending on the loan term and how much of your loan is guaranteed by the Small Business Administration.
Pros and Cons
Pro: If you’re a business owner who prefers one-on-one interaction with a banker, you’ll appreciate the Chase loan process. You have to speak directly with an agent each step of the way.
Pro: Chase will send funds directly to a bank account, which may give you access to money faster.
Pro: Most small business loans that aren’t government backed have short loan terms from 2 to 5 years. The Chase Business Term Loan allows you to borrow for up to 7 years.
Pro: Chase is among the top five banks in the country that give out the most SBA loans. If you’ve been turned down for a small business loan in the past, the Chase SBA loan is worth considering.
Con: Finding an agent on the phone to go over the details of both small business loan options is difficult and applying for a loan in person can be stressful.
Con: Interest rates, closing fees, and other information isn’t readily available. You won’t know exactly how much a loan will cost you until you track down an agent to set up an appointment.
Alternatives to Chase Small Business Loans
Wells Fargo is another traditional brick-and-mortar bank that offers a business term loan option. Wells Fargo’s is called, Wells Fargo BusinessLoan. You can borrow from $10,000 to $100,000. It’s unsecured which means you don’t have to put up your own collateral. Terms range from 12 to 60 months. The loan has a $150 documentation fee, but no prepayment fees. Unsecured interest loan rates start at 6.25% APR and goes up to 22.99%. Wells Fargo is also a top lender of the SBA loan, so it’s another option if you have trouble qualifying for business funding on your own.
FundingCircle is an example of an alternative lender that offers pre-approvals online with transparent terms. You can borrow from $25,000 to $500,000. Loan terms are 12 to 120 months. Interest rates range from 4.99% to 24.99%. There’s an origination fee of 3.49% - 6.99% and no prepayment penalty.
Who Will Benefit the Most From a Chase Small Business Loan?
You’ll benefit from a Chase Business Term Loan if you’ve been in business for at least a year and you’re turning a profit. Chase will allow you to borrow money for a longer period than both alternatives we discussed above and your loan can be funded fairly quickly.
Applying in person may be a turnoff for some business owners. But, if you’re interested in an SBA loan, choosing Chase may be worth your while because it has a record of funding a high volume of SBA loans.
SBA loan eligibility – https://www.sba.gov/content/7a-loan-program-eligibility
Top 100 SBA lenders – https://www.sba.gov/lenders-top-100