Hi, everyone. This is Alejandro Cremades,
and today we’re going to be talking about how to apply for an SBA Loan.
Before we get started, make sure that you hit that Subscribe button, and this way,
you will never miss out on any of the videos that we roll out every week.
The SBA is obviously synonymous with support for small businesses. In today’s video,
we’re definitely going to be covering how to do the application, how to make it happen, and how to
secure those funds that would help your business grow. So without further ado, let’s get into it.
What is the SBA? The U.S. Small Business Administration started almost 70 years ago,
back in 1953, in order to help small businesses either on starting out or on helping them during
times of crisis. And we saw that, for example, how the SBA Loans kicked in when we had the pandemic,
the Coronavirus. Again, it’s the entity that the government is using in order to foster innovation,
in order to foster the new jobs that are being created, and a great source for
small businesses to obtain access to financing. In terms of the cons and criticisms on the SBA,
up until recently, there weren’t a lot of entrepreneurs taking advantage of these programs
because of the nature of them. Typically, there was a lot of red tape. It was very difficult to
gain access to that money. The applications were a bit of a burden, and entrepreneurs actually
preferred going to the more traditional sources and investors that wouldn’t put those hurdles
that come with taking money from the government. That was up until recently when the Coronavirus
hit when you saw the Paycheck Protection Program, the PPP Loans that really helped entrepreneurs
and also the owners of small businesses in order to maintain their business during those
difficult times. This has opened the mindset and also the way that people are now perceiving
the SBA Loans as a potential good method in order to get those companies up and running.
So, what’s a small business anyway? And who are those small businesses that qualify in order to
get the SBA involved? According to the SBA, in order to qualify,
the small business needs to be the following: Be a full profit business of any legal structure.
Be independently owned and operated. Not be nationally dominant in its field.
Be physically located and operate in the U.S. or its territories.
Obviously, what is considered a small business could vary per
industry. One thing that is critical that the SBA is going to require is that your business
is in a position or has a corporate structure that is paying those taxes to the IRS.
Some of those things are going to be critical, and without that,
it’s going to be impossible for you to apply to those programs that they have for loans.
What does the SBA do? According to certain blog posts that the organization has published by some
of the leadership, the SBA has three main things: Capital
Contracts Counseling
There’s also mentorship, especially when we’re talking about those contracts that the SBA
is going to connect you with, and that is with the score program where there are mentors that
are helping some of those small business owners in order to understand what is the
best path forward and how they should be executing in order to build their business.
When it comes to the actual loans, the first one is the SBA 7(a) loan. With this loan, what you
want to go for is up to $5 million, and some of the requirements are going to be the following:
SBA Loan Application Form 1919 Personal history
Personal financial statement Business financial statement and forecast
P and L Statements Business licenses
Three years of personal and business tax returns
Resumes of the principles of the company Copies of leases
Then you have the SBA 504 Loans. Those are essentially for acquiring assets,
and they can also go up to $5 million. Some of the requirements are going to be the following:
Be a U.S.-based for-profit company. Have a net income of less
than $5 million after taxes. Have a net worth of under $50 million.
Must have a feasible business plan. Have qualified management expertise.
Then you have the SBA Microloans. Those are the typical ones that are fantastic for startup
companies. They’re much easier to actually apply for and much easier to get. So if you’re starting
your business, maybe a hyper-growth company, a company from scratch, and you don’t know how to
start or perhaps some money that you need to start the operation, to pay for the website,
the servers, or even the graphic design, or perhaps even the incorporation of certain parts of
the business or documentation with your lawyers. This is a great program that you could use.
Then you have the Economic Disaster Loans. Those are some of the ones
that you saw during the pandemic, during the Coronavirus, and they can go up to $2 million.
Then you have the SBA Investment Capital. Now, this is less known. This is where they
partner up with some institutions that are deploying the capital, and some of the ways
in which you have to keep in mind that this money is deployed are the following:
Debt in the form of a Pureloan Equity funding in exchange
for a share of ownership A combination of both equity and debt funding
So how would you start the application? Where do you go? How does this work? Some of
the step-by-step that you need to take into consideration to make it happen from Point A
to Point C are the following: Research the qualifications
Choose a lender or intermediary Complete the loan application
Send follow-up documents Wait until you get a response
There are also alternatives to the SBA and to the loans and some of those
financing structures that we have been discussing. Some of the most common are the following:
Friends and family Angel investors
Venture capital firms Private equity funds
Strategic units of big corporations
Additionally, you also have business grants, competitions from universities, accelerators,
and incubator programs that can help. That could be a great alternative if you’re starting up.
So, hit a Like on this video. Leave a comment. Let me know what you’re up to, and then also Subscribe
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And if you’re raising money, send me an email at alejandro@pantheraadvisors.com. I would love
to help you out with your capital-raising efforts. Thank you so much for watching.