As a small business owner, you more than likely know how difficult it is to obtain an SBA loan. Besides the fact there’s tons of paperwork involved, it can take three to four months just to receive an answer.
SmartBiz offers SBA Loans (it’s an SBA approved financial institution), but at a much faster pace. Since it automates everything during the application process (documents can be uploaded), you may actually be able to receive your funds within 7 business days.
SmartBiz is the best of both worlds when it comes to online small business lenders. You get the low rates and long term of an SBA loan, and the funding process is on par with other lenders so long as you work to submit documentation quickly.
If you want to benefit from an SBA loan in a more efficient way, let’s see how SmartBiz can help.
SmartBiz Small Business SBA Loan Details
SmartBiz SBA Loans range from $30,000 to $5 million on terms of 10-25 years. Its variable APR ranges from 6.36% to 9.57%.
Interest rates are tiered depending on your loan amount. For loans $30,000 - $50,000 interest rates are 8.25%, $50,000 - $350,000 interest rates are 7.25%, and loans from $500,000 to $5,000,000 interest rates are 6.00% - 8.25%.
You must know how you’re going to use the funds from SmartBiz, as the purpose of your loan influences how much money you can receive:
- Loans of $5,000 to $25,000 can be used for working capital (and so can all the other amounts)
- Loans of $26,000 to $150,000 can be used for acquiring another business and refinancing existing, high-interest debt
- Loans of $151,000 to $250,000 can be used to refinance business debt secured by real estate, or to buy real estate
- Finally, loans of $251,000 to $350,000 can be used to refinance debt not secured by real estate
SmartBiz has a detailed repayment calculator on its home page in case you’d like to see what your estimated payments might be. For example, if you borrow $150,000 on a 10 year loan at an APR of 6.96%, your monthly payment will be $1,665.31. Overall, you’ll receive $143,683 since you have to account for closing costs and fees.
The Pros and Cons of a SmartBiz Small Business SBA Loan
Pro: SmartBiz’s APRs are the lowest of any online lender, which makes the loan more affordable.
Con: However, it’s one of the only online lenders to have a variable APR. That means the rate is subject to change with the prime rate. That might not be cause for alarm, though. Even if rates rise, chances are the APR will remain the lowest – some lenders have APRs of up to 40%.
Pro: Similar to the APRs, the 10 year repayment term is the longest of any online lender. This also makes the monthly payment much more affordable.
Con: By the same token, “dragging” the repayment period out can make for a more expensive loan, even if the APRs are low. Generally, the longer your term, the more interest you’ll pay on the loan. From our example of borrowing $150,000, 120 payments of $1,665.31 results in a total amount of $199,837.20. That’s almost $50,000 more. Thankfully, there’s no prepayment penalty.
Pro: If you’re looking for an SBA loan, but don’t want to deal with the hassle of all the paperwork, and how time consuming it is, SmartBiz is a great alternative. You can pre-qualify for a loan in 5 minutes and get pre-approved for a loan within 30 minutes.
Con: The use of your loan factors into how much funding you can receive. Other lenders aren’t as strict with how you use the funding.
Pro: If you don’t qualify for an SBA loan with SmartBiz, it works with other 3rd party lenders that may be able to help you.
Con: While the rates and terms are great, the fees aren’t. There’s a 4% origination fee, bank closing costs, and a guarantee fee for loans over $150,000.
What Businesses Are Eligible For a Loan With SmartBiz?
SmartBiz says the following characteristics are typical of the businesses it lends to:
- Operating history of 2+ years
- Industries served: manufacturing, retail, product, medical, contractor, service, and more
- Has $50,000 to $5,000,000 in annual revenue
- Owners are at least 21 years old and are US citizens
- Minimum credit score of 600 needed
- Need enough cash flow to handle payments (most important)
- You can’t have any outstanding judgments, liens, bankruptcies, etc.
- You also can’t have any criminal record other than minor vehicle violations
SmartBiz also lends to franchises. Overall, it’s looking to lend to well-established small businesses that have 1 – 40 employees, very good cash flow, and are profitable.
We recently received an email from a reader that applied to SmartBiz and was told she needed a 150+ Business FICO score in order to be approved.
Application Process and Documents Needed
As SmartBiz’s loans are SBA approved, a little more paperwork is required than with your typical online lender. However, it’s still much less when compared to what a bank would ask you for. They don’t look in every nook and cranny of your financials, but have the following documents and information ready during the application process:
- Past personal tax returns
- Personal financial information (bank statements are key)
- Previous government loan history for your business
- Past business tax returns
- Balance sheet
- Income statement
- Management team information
- Type of business, date of inception, and documentation proving the formation of the business
- A subordination release signed by your landlord if you want to borrow more than $26,000
Note that larger loans are going to need more documentation. While SmartBiz can have you funded within a week, the process can take up to 3 weeks if you’re slow with submitting any requested documents. The quicker you work, the faster the process moves. It’s better to be prepared ahead of time.
The Fine Print
SmartBiz’s loans don’t have a prepayment penalty, but there is a 4% origination fee associated with the loan.
The biggest drawback is the guarantee fee, which is paid to the SBA. Thankfully, they did away with the fee for loans $150,000 or less, but it’s 2.25% of the loan amount for loans $151,000 and up.
Loans less than $25,000 don’t require any collateral, but loans over $25,000 require a UCC lien on business assets. A personal guarantee is also required from all individuals who own 20% or more of the business.
SmartBiz estimates closing costs are around $23 for loans $25,000 or less, and $317 for loans over $26,000.
Which Businesses Benefit the Most from a SmartBiz SBA Loan?
Businesses that have been around for two or more years, that are on the smaller side of the small business spectrum (need less than $350,000 in funds), and that want to grow and expand will benefit the most from a SmartBiz SBA loan.
Businesses should be in good financial shape overall and not hurting for money. They also shouldn’t be struggling to manage cash flow.
Other Alternative Small Business Lenders
When it comes to getting an SBA loan, SmartBiz is your best bet. It’s the first lender to offer SBA loans online. No other lenders come close to the low rates and 10 year repayment term it offers.
However, SmartBiz does have some stricter eligibility requirements, so if you get denied there, try these alternative small business lenders.
If you have a branch nearby, you might want to check out Wells Fargo’s small business loan. You can borrow between $10,000 and $100,000 on terms of 2 to 5 years, and the APR ranges from 6.50% to 22.99%.
Since this is a bank loan, the process and requirements are similar. Wells Fargo places a strong emphasis on cash flow, there’s a once a month payment, and you need decent credit (most likely over 600) to qualify. There’s an opening fee of $150 which can be waived if you sign up for a Wells Fargo account.
Funding Circle offers loans from $25,000 to $500,000 with repayment terms of 1 to 5 years. APRs range from 4.99% to 26.99%, and the origination fee ranges from 0.99% to 6.99%. You need two years of operating history, $150,000 in annual revenue, and minimum credit score of 620 to qualifya.
Lastly, in case you don’t qualify for the other two, Lending Club allows you to borrow up to $300,000 on terms of 1 to 5 years with APRs ranging from 5.99% to 29.90%. Origination fees range from 1.99% to 8.99%, and your business only needs $75,000 in annual sales, and two years in business to qualify. Fair or better personal credit is needed.
Shop Around to Keep Costs Low
Even though SmartBiz SBA loans offer some of the best rates and terms available for online lenders, it does come with its share of fees and costs. You should shop around and compare the overall cost of the loans you get approved for to make sure you’re getting the best deal. Doing so within a 30 day window will have less of an impact on your credit score.
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