The Federal Small Business Administration (SBA) does not directly fund loans. They are a government agency guarantor for loans that are made by the lending agency. This allows small businesses in search of funding to obtain a loan that the bank would not normally entertain. The Federal government is basically assuring that should the loan go into default they will reimburse the lender for between 50% – 80% of the principal balance. Therefore the interest rates on SBA guaranteed loans can be expected to be higher than normal going bank rates; usually 2.5% to 4.5%.

Three Popular Accessible SBA Loan Programs for Small Businesses

1. SBA Small Loan Advantage Program:

  • Quick Turnaround
  • Start-ups
  • Fast working capital
  • No collateral required
  • $5,000 to $25,000
  • Application forms are available on line at:
  • Superior Financial Group www.superiorfg.com Send applications to: Ms. Sue Malone, Walnut Creek, CA; Telephone (877) 675-0500
  • U.S. Bank , Nashville, TN; www.usbank.com Ms Janetha Brown; Telephone (615) 733-0720
  • Celtic Bank, Panama City, FL; www.celticbank.com Fred Crispin; Telephone (850) 236-5166

2. SBA 7(a) Loans

  • Shown illustrated at http://www.sba.gov/category/navigation-structure/loans- grants/small- business-loans/sba-loan-programs/7a-loan-program of the SBA web site.
  • Maximum Loan $5,000,000
  • Maturity: 25 years for real estate, up to 10 years for equipment (depending on the useful life of the equipment) and generally up to seven years for working capital.
  • Basic uses for 7(a) loan proceeds include:
    • provide long-term working capital to use to pay operational expenses accounts payable and/or to purchase inventory
    • Short-term working capital needs, including seasonal financing, contract performance, construction financing and exporting
    • Revolving funds based on the value of existing inventory and receivables, under special conditions
    • To purchase equipment, machinery, furniture, fixtures, supplies or materials
    • To purchase real estate, including land and buildings
    • To construct a new building or renovate an existing building
    • To establish a new business or assist in the acquisition, operation or expansion of an existing business
    • To refinance existing business debt, under certain conditions
    • Comprehensive Business Plan Required
    • Other information and/or documents may be required by the lending institution
    • Applications and funding are provided through SBA Preferred Lenders and participating local banks. Preferred Lenders in East Tennessee include:
      • Bank of America
      • Regions Bank
      • SunTrust Bank
      • US Bank
      • BB&T
      • First Financial Bank
      • Vantage South
    • There are no Guarantee Fees or Servicing Fees on SBA loans through September 30, 2014.

3. COMMUNITY DEVELOPMENT FINANCIAL INSTITUTION: Knoxville Area Urban League; 1514 East 5th Avenue, Knoxville, TN 37917; Felix Harris, Telephone (865) 524-5511

For businesses that cannot qualify for loans through the normal channels this resource is available.

  • Loans $2,500 to $75,000
  • Maturity: Up to 10 years
  • Interest: Depends upon circumstances (size, maturity, disposable income, debt-to-income ratio, etc) – 3% to market Rate
  • Fees: Application fee $50; Origination fee 1-2% of loan
  • Credit Report: $15
  • Third Party Appraisals $275-$575
  • Title Review $50-$70

4. SOUTHSTAR CAPITAL; 830 Lowcountry Blvd. Suite 201, Mount Pleasant, SC 29464 Matt Shallenberger, Telephone (865) 216-2069 – www.southstarcapital.com

  • Accounts Receivable Financing (25k – 2MM)
  • Purchase Order Financing (25k – 2MM)
  • Equipment Financing (10k – 1MM)
  • For those businesses that need short term Cash Flow financial assistance or longer term fixed asset funding
Rev May 28, 2014
SOURCE: Chuck Christiansen, SCORE Counselor
The material in this publication is based on work supported by the U.S. Small Business Administration under cooperative agreement SBAHG-04-S-0001. Any opinions, findings and conclusions or recommendations expressed in this publication are those of the author and do not necessarily reflect the views of the U.S. Small Business Administration. The information contained in this publication is believed to be accurate and authoritative but is not intended to be relied on as legal, accounting, tax or other professional advice. You should consult with a qualified professional advisor to discuss issues unique to your business.