The SBA lowered requirements for larger loan amounts earlier this year. This is great news, but some business owners still are unsure how loan sizes are calculated. Do you know the four factors impacting your loan size?
Annual Revenue
One of the four factors impacting your loan size is often determined by your ability to generate revenue from your existing business operations. While later stage companies with higher revenue can receive larger loan amounts, an average annual revenue of $50,000 can qualify you for an SBA 7(a) loan offer.
Business Stage & Experience
The length of time in business is another on of the four factors impacting your loan size. This helps determine the viability of your operation in the future. While some lenders require many years of business operation, for business owners with strong credit scores, one year in operation could help you secure a loan up to $50,000. Those with more than three years in operation could receive a loan up to $500,000.
Financial Stability
Your business and owners’ credit scores reflect a track record of repayments and how finances have been managed over time. In the early years of a business, maintaining strong credit can be challenging. Fortunately, the SBA only requires a ‘Fair’ score of 650+ to be eligible for a loan.
Existing Debt
If you have high outstanding debt amounts, it may be more difficult to be approved for a loan. Keep in mind that high interest rate debt can be refinanced or consolidated through an SBA loan. If you get approved for an SBA loan–which typically carries more favorable repayment terms–you can refinance your debt to help pay it down. This is a great and popular option for many small business owners. Once debt it paid down, you can reapply for higher SBA loan amounts.
Have you learned about the four factors impacting your loan size and want to see how much you might qualify to receive? Complete our 10-minute pre-screen application to receive an offer for your business. There’s no impact on your credit score.
