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Small Business

Top SBA Lenders: Find the Best SBA Loans for Your Business

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

SBA loans
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Starting a new company or growing an existing business costs money, and you’ll probably need to borrow funds to help you along the way. Loans from the U.S. Small Business Administration (SBA) are among the most popular and desirable financing options for small business owners. SBA loans typically have competitive terms and interest rates, and businesses that do not qualify for traditional business loans may be approved for SBA loans. Because these loans are in high demand, the application process can be strenuous. Before you get started on an application, we’ll help you understand the top loan options from the SBA and where to find them.

What is the SBA?

The SBA was created in 1953 to protect the interests of small-business owners and help them start and grow their entities. The SBA serves business owners in the U.S., Puerto Rico, U.S. Virgin Islands and Guam.

The SBA provides resources to guide new entrepreneurs through each step of launching a business, from making a plan to registering their businesses and managing day-to-day operations. The SBA has several funding programs to assist small-business owners in need of capital. These programs offer business loans, investment capital, disaster assistance, surety bonds and grants.

Rather than lending money directly, the SBA works with lending partners to issue loans to small businesses. These partners could include banks, community development organizations and microlending institutions. The SBA guarantees loans and reduces the risk for lenders, which makes it easier for small-business owners to be approved for financing.

To be eligible for an SBA loan, you must operate a for-profit business in the U.S. or its territories and you must have invested your own time or money into the business. The SBA also considers your business purpose, location, size, ability to repay and your personal character. You must have exhausted all other financing options before applying for SBA loans.

3 types of SBA loan programs

Three SBA programs are the 7(a) loan program, the 504 loan program and the microloan program. These loans range from small to large and can be used for a variety of business purposes. The SBA also offers export assistance loans, short-term and working capital loans. An SBA-approved lender can make sure you apply for the right loan for your business needs.

SBA loan programs at a glance

SBA Loan TypeLoan AmountTermInterest RatesFeesBest For
7(a) loanUp to $5 millionUp to 25 yearsMaximum of 12.81% for fixed-rate loans; maximum of the prime rate* plus 4.75% for variable-rate loansGuarantee fee of 0.25% to 3.75% of loan amountStartup costs, business expansion or machinery, furniture or supply purchases
504 loanUp to $5.5 million10 to 25 yearsFixed rate determined when loan is issued, though typically lower than 7(a) ratesAbout 5% of loan amount in feesReal estate or equipment purchases
MicroloanUp to $50,0006 years6.5%-9%; the average in fiscal year 2017 was 7.5%No guarantee fee, but borrowers may be charged application and origination fees up to 2% of the loanLow-income, minority, veteran and women entrepreneurs

* Prime rate based on the current market interest rate.

7(a) loan program

The SBA’s most popular program is the 7(a) loan program. For small-business owners, 7(a) loans can cover the purchase of new property, machinery, furniture or supplies. You could also use a 7(a) loan to pay for startup costs or refinance existing debt. Before applying for a 7(a), you must be able to prove you have used all other sources of capital, including your personal assets.

The 7(a) loan program offers lower down payments and more flexibility than other financing options. Most 7(a) loans require monthly payments of combined principal and interest. Fixed-rate 7(a) loans would require the same payment each month because the interest rate would remain constant. Variable-rate 7(a) loans would require a different payment amount each month as the interest rate changes.

504/CDC loan program

The SBA’s 504 loan, also called a Certified Development Company loan, helps small-business owners expand through real estate and equipment purchases. You could use loan funds to buy land, existing buildings, long-term machinery or new facilities. But 504/CDC loans cannot be used to fund working capital or inventory, or to consolidate or refinance debt. You also cannot use the funds to invest in rental real estate.

Similar to a 7(a) loan, you must have used all other financial resources, including personal funds, before applying for a 504/CDC loan. To be eligible, your business must be worth less than $15 million and you must have a net income no higher than $5 million after taxes for the two years before applying. You must also be able to repay the loan on time using the projected cash flow of your business.

Microloan program

SBA microloans are smaller than average business loans, usually amounting to about $13,000. The SBA microloan program provides funding to nonprofit microlenders who then issue loans to women, low-income, veteran and minority business owners. Each microlender has its own lending and credit requirements, but applicants would generally be required to provide collateral, a personal guarantee and possibly complete a training program.

Microloans can be used to fund working capital, inventory purchases, furniture, machinery or equipment. You cannot use a microloan to pay off existing debt or to purchase real estate. The amount of your loan, your planned use for the funds and your business needs would determine the repayment terms on your microloan.

Top SBA lenders

Top 7(a) lenders

If you’re looking for an SBA loan, you may want to apply for a 7(a) loan, as it’s the most popular offering from the SBA. You would need to submit an application at an SBA-approved lender in your area. Here are the 10 most active SBA 7(a) lenders, per the most recent available data:

1. Live Oak Banking Co.

Approval amount: $1.27 billion
Approval count: 858

2. Wells Fargo Bank, National Association

Approval amount: $1.20 billion
Approval count: 3,898

3. The Huntington National Bank

Approval amount: $826.28 million
Approval count: 4,628

4. JPMorgan Chase Bank, National Association

Approval amount: $605.07 million
Approval count: 2,604

5. Newtek Small Business Finance Inc.

Approval amount: $559.21 million
Approval count: 767

6. Byline Bank

Approval amount: $513.65 million
Approval count: 454

7. Celtic Bank Corp.

Approval amount: $421.43 million
Approval count: 1,213

8. Compass Bank

Approval amount: $357.78 million
Approval count: 821

9. First Bank

Approval amount: $357.46 million
Approval count: 332

10. U.S. Bank, National Association

Approval amount: $351.06 million
Approval count: 2,286

Top 504/CDC lenders

If you need funding to make a large real estate or equipment purchase, a 504/CDC loan may be your best bet. Here are the 10 most active 504/CDC lenders*:

1. CDC Small Business Finance Corp.

Approval amount: $298.93 million
Approval count: 250

2. Mortgage Capital Development Corp.

Approval amount: $238.23 million
Approval count: 213

3. Empire State Certified Development Corp.

Approval amount: $213.63 million
Approval count: 204

4. Florida First Capital Finance Corp.

Approval amount: $191.69 million
Approval count: 201

5. Florida Business Development Corp.

Approval amount: $158.59 million
Approval count: 192

6. Mountain West Small Business Finance

Approval amount: $146.01 million
Approval count: 175

7. Business Finance Capital

Approval amount: $125.92 million
Approval count: 116

8. California Statewide Certified Development Corp.

Approval amount: $120.17 million
Approval count: 119

9. Small Business Growth Corp.

Approval amount: $108.23 million
Approval count: 168

10. Colorado Lending Source Ltd.

Approval amount: $98.21 million
Approval count: 114
*As of Aug. 31, 2018

The bottom line

Business owners typically covet SBA loans because they offer longer terms and lower interest rates than other term loans. Because the SBA backs the lenders issuing SBA loans, borrowers can often receive favorable conditions.

But the application process could be lengthy, and it could take 60 to 90 days before you receive funding. Application requirements could include collateral, a down payment and a minimum personal credit score of 680. The SBA also prefers profitable businesses that have been operating for at least two years and generate at least $50,000 in annual revenue.

If you’ve got the time and patience to withstand the underwriting process, an SBA loan could be a suitable option to fund your business needs. Be sure to check with an SBA-approved lender to make sure you apply for the right product to fit your business. Take into consideration the projects and purchases you plan to fund with your loan, as that would impact which financing option would be best for you.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Melissa Wylie
Melissa Wylie |

Melissa Wylie is a writer at MagnifyMoney. You can email Melissa at [email protected]

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Small Business

The Most Important Industries in America’s Largest Cities

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

Most important industries
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When starting a new business, you could build your venture around industries that are thriving in your area. Some cities are known for certain types of companies, and you may want to enter a market where businesses are already succeeding.

But what about opportunity for employees in those industries? The highest-paying jobs in the largest industries can be the most difficult to land. Ideally, a city’s top-paying industry would present plenty of lucrative job options for residents.

MagnifyMoney researchers determined the most prominent industries in the country’s 50 largest metro areas and analyzed how well those industries pay compared with the cost of living. In many instances, industry density doesn’t equate to more money in workers’ pockets.

When we plotted all 50 cities across 20 industries, retail jobs, for example, appear relatively plentiful but tend to be lower paying. High-paying utilities jobs, on the other hand, are among the scarcest positions.

Key findings

  • New Orleans has the top-paying industry relative to local cost of living: agriculture, forestry, fishing and hunting. Monthly payroll per employee in this field is roughly 160 times median monthly housing costs or 13.3 times median annual housing costs here. However, this industry has a small presence in the area, just 0.16% of all establishments.
  • Washington, D.C. takes the top spot as the metro area with the highest concentration of one industry. In the nation’s capital, nearly 22% of all establishments qualify as part of the professional, scientific and technical services industry.
  • Patterns emerge despite geographic differences: Retail makes up nearly 13% of establishments in each of the 50 cities and pay is usually low. The information industry and the management of companies and enterprises industry leaves a small footprint in cities but pays its workers well.
  • Of all industries in the study, only the professional, scientific and technical services industry shows significant variation from metro to metro. While it makes up nearly 22% of all establishments in D.C., as we noted earlier, it claims just 8.7% of establishments in Riverside, California.

Industries that pay the most based on local costs

1. New Orleans – Agriculture, forestry, fishing and hunting

Although agriculture, forestry, fishing and hunting makes up just 0.16% of all establishments in New Orleans, the industry offers employee pay that’s 159.8 times median monthly housing costs.

New Orleans has a long history of farming and agriculture in the region, thanks to rich soil resulting from years of flooding. To shorten supply chains in the city and build the local food economy, the New Orleans Food and Farm Network connects urban and regional farmers with restaurants, stores and farmers markets. Louisiana ranks No. 33 in the United States for farm cash receipts, about $3 billion, a significant drop from its 2012 peak of nearly $4 billion. The state issued more than 2.5 million recreational hunting, fishing and trapping licenses in fiscal year 2017, the most recent data available.

2. Cincinnati – Management of companies and enterprises

The management of companies and enterprises sector is made up of businesses that own equity in other companies and influence management decisions. In Cincinnati, this industry comprises 1.24% of all businesses in the metro area. These companies provide employee pay that’s 139.2 times median monthly housing costs.

The Cincinnati housing market includes counties in Ohio, Kentucky and Indiana, areas that support sectors such as professional and business services, financial activities, and educational and health-related services. Retail dominates this area’s economy — 13.7% of establishments.

3. Houston – Management of companies and enterprises

Not far behind Cincinnati, payroll per employee in Houston’s management of companies and enterprises sector is 139 times median monthly housing costs. But the industry accounts for just 1% of businesses in the area.

Houston is often thought of as a hub for the oil and gas industry, but our research showed professional, scientific and technical services is the most prolific industry in the city. To keep up, the oil and gas sector is reportedly incorporating new technology, like fintech and artificial intelligence solutions, from experts outside the field.

Industry density in major metro areas

1. Washington, D.C. – Professional, scientific and technical services

The U.S. capital’s economy is dominated by the professional, scientific and technical services sector — 21.8% of all businesses, the highest rate on our list. Average payroll per employee in that industry is quite high at $102,331 but an elevated cost of living makes that figure less impressive. Monthly payroll per employee is 58.6 times median monthly housing costs.

Jobs in the professional, scientific, and technical services sector include accounting, legal representation, engineering, computer services, advertising and consulting.

2. St. Louis – Health care and social assistance

St. Louis is slightly behind Washington, D.C., with 21.6% of all companies falling in the health care and social assistance industry. Payroll per employee in the industry is 45.6 times median monthly housing costs.

Hospitals support more than 116,000 jobs in St. Louis, according to research from the Missouri Hospital Association. Hospitals in Missouri contribute more than $26 billion in gross state product.

3. San Jose – Professional, scientific and technical services

In San Jose, 18.4% of businesses fall into the professional, scientific, and technical services sector. Jobs in the industry pay 66.9 times more than the median monthly housing costs in the area.

San Jose is the country’s most expensive housing market, where the median cost of a single-family home is $1.1 million. Rent is expensive, too — the city says renters must earn $108,920 per year to afford the average effective monthly rent of $2,723 for a two-bedroom apartment. Our study found that the highest-paying jobs belonged to those in the information industry with employee payroll 113.6 times higher than median housing costs.

Methodology

In order to find the highest paying industry and most common industry in every metro area, researchers analyzed data from the U.S. Census Bureau. To find the highest paying industry in every metro area, researchers looked at the ratio of payroll per employee to local median monthly housing costs. To find the most common industries, researchers divided the number of industry establishments by the total number of establishments.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Melissa Wylie
Melissa Wylie |

Melissa Wylie is a writer at MagnifyMoney. You can email Melissa at [email protected]

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Small Business

How to Determine If Your Business Is a ‘Small Business’

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

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To be considered for loans and other assistance from the U.S. Small Business Administration, your company would need to meet the SBA’s definition of a small business.Certain government contracts and loan programs from the SBA are reserved for small businesses. To ensure the right companies receive these opportunities, including the relatively low interest rates that come with its loan programs, the SBA enforces eligibility requirements.

The SBA’s size standard is based on employee count and average annual receipts. The current averaging period is three years, although the SBA recently proposed a rule change that would allow businesses to average revenues from the past five years. The SBA’s size standard indicates the largest size that a business could be to remain eligible for SBA loans and federal contracting programs.

“What they have is conditions on how much a business can make as far as revenue in order to qualify for an SBA-guaranteed loan,” said Kyle Bayliss, regional director of the Maryland Small Business Development Center. Across the country, SBDCs assist business owners through a partnership with the SBA.

Continue reading to find out whether your business is a small business according to SBA guidelines, and what that means for your company.

The SBA’s definition of a small business

To be classified as a small business, your company would need to meet or fall below the SBA’s maximum annual revenue or employee count. The SBA sets specific standards for individual industries, so the exact requirements would depend on the type of business you run.

The SBA outlines standards for each industry listed in the North American Industry Classification System, or NAICS. The SBA provides a lengthy table describing employee and revenue limits for each industry, organized by NAICS code. You can find the table here.

Revenue limits range from $750,000 to $38.5 million, depending on industry, and employee requirements span 100 to 1,5000 employees. As long your business falls below its designated revenue or employee threshold, it could be considered a small business in the eyes of the SBA.

All workers, including those employed on a full-time, part-time and temporary basis, contribute to your overall employee count. If you acquired another business, employees from that business would also contribute to your total. The SBA takes an employee count on a 12-month basis, or counts employees for each pay period if you have not yet been in business for a full year.

The SBA’s definition of a small business incorporates companies that are far larger than the average small business seeking help from the Maryland SBDC, Bayliss said. An SBA small business may be larger than most would think. Businesses that support oil and gas operations, for instance, can have annual revenue up to $38.5 million.

Furthermore, the SBA requires that small businesses also meet the following requirements to be eligible for funding:

  • For-profit, officially registered and operating legally
  • Physically located in the U.S. and operates in the U.S. or its territories
  • Invested equity from the business owner
  • Sound business purpose
  • Ability to repay any debt

What it means to be a “small business”

Businesses that meet the SBA’s small business criteria can apply for SBA loan programs and federal contracting assistance. “The lending part of it is a really big help,” Bayliss said.

Your small business could be eligible for the following SBA-backed loans:

7(a) loan program: The SBA’s most popular program provides general-purpose loans for small business owners. You could borrow up to $5 million with repayment terms between seven and 25 years. Specialty loans within the 7(a) programs are available for certain needs like smaller loan amounts, export working capital or express time to funding.

CDC/504 loan program: Small businesses looking to acquire fixed assets, like buildings, land or machinery, can borrow funds to finance their purchase. There’s no set limit on loan size, though Certified Development Companies must administer all 504 loans. The SBA typically provides 40% of the total cost while a CDC contributes 50%. The business owner would need to provide the remaining 10%. The assets being purchased would serve as collateral on the loan.

Microloan program: For smaller funding needs, the SBA microloan program provides up to $50,000 to small businesses that have trouble qualifying for traditional business loans. Repayment terms for microloans typically max out at six years. SBA microloans are generally reserved for women, low-income, veteran and minority business owners.

SBA-designated small businesses can also apply for federal contracts through the following program:

8(a) Business Development program: The SBA limits competition for certain government contracts to small businesses that participate in the 8(a) program. The goal is to help disadvantaged businesses win valuable contracts. To be eligible for the program, an owner who is economically or socially disadvantaged must control at least 51% of the business. The owner must also have a personal net worth of $250,000 or less, $4 million or less in assets or $250,000 or less in average adjusted gross income for three years.

Additionally, business owners must show good character and potential to successfully perform. If approved for the 8(a) program, you could compete with similar businesses for sole-source contracts. You could also receive assistance such as business training, counseling or marketing help from a mentor who is also participating in the program.

The SBA 8(a) program provides a leg up for small businesses that may not otherwise win big contracts, Bayliss said. Women and minority entrepreneurs particularly benefit from this program, he said.

“Actually doing government contracting, it’s really hard, especially for small businesses,” Bayliss said.

Other benefits of meeting the SBA’s size standard

SBA-approved small businesses could have access to additional assistance, most notably resources set aside for women and veteran entrepreneurs.

For instance, the SBA’s Women-Owned Small Businesses Federal Contracting program reserves federal contracts for qualified women-owned businesses. It’s like the 8(a) program, but specifically designed to give women entrepreneurs increased access to federal contracts.

Organizations such as the National Women’s Business Council and the Association of Women’s Business Centers also provides resources and opportunities for women-owned small businesses through partnerships with the SBA. To access resources for women-owned small businesses, you would need to receive certification from the SBA. You can apply for certification here.

Eligible veteran-owned small businesses could also access training programs and specialized loans through the SBA Office of Veterans Business Development. Programs like Boots to Business and the Veteran Federal Procurement Entrepreneurship Training Program teach veterans the skills to successfully run a small business.

The SBA also guarantees loans for veterans through the SBA Veterans Advantage program. Additionally, the Military Reservist Economic Injury Disaster Loan Program provides funding to businesses with employees who have been called to active duty.

Becoming certified for these programs could be a lengthy process. The SBA would ask you to submit information about your business, such as organizing documents, past financial statements and a business plan, as well as personal information like income statements and proof of citizenship.

As an SBA small business, you may be able to qualify for government-sponsored business grant programs as well. Both the Small Business Innovation Research Program and Small Business Technology Transfer Program are tied to the SBA, and grant recipients would likely need to meet SBA size standards.

The bottom line

The SBA provides countless resources to business owners across the country, but there’s a catch — you have to qualify as a small business according to the SBA’s standards.

Fortunately, these requirements are broad and take your specific industry into consideration. You would need to fall below the threshold of number of employees or annual revenue that the SBA sets for your industry. The limit on employees ranges from 100 to 1,500 workers, while revenue maximums range from $750,000 to $38.5 million.

If your business is within the SBA’s parameters, you could apply for a number of contracting and business loan programs. You could also receive additional resources set aside for underserved business owners, such as women and veteran entrepreneurs.

Your local small business development center could help you determine which programs your business may be eligible for and provide assistance with any applications. Be sure to calculate the correct size of your business before applying for SBA resources.

This article contains links to LendingTree, our parent company.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Melissa Wylie
Melissa Wylie |

Melissa Wylie is a writer at MagnifyMoney. You can email Melissa at [email protected]