Latest news with #SBA-backed
Yahoo
22-05-2025
- Business
- Yahoo
How Trump's SBA Diverged From Harris' Vision ForBlack Entrepreneurs
Deals from the Small Business Administration (SBA) secured by Black-owned businesses are being terminated as new rules from the Trump administration are making it harder for them to maintain, Forbes reports. To make SBA-backed loans safer for the government, some of the new rules, effective June 1, are stricter than they were during President Donald Trump's first term. One new rule requires any business receiving an SBA loan to be 100% –up from 51% — owned by U.S. citizens, who must be permanent residents for at least six months. The agency announced 'SBA Eliminates Disastrous Biden-Era Underwriting Standards,' labeling an 'era of irresponsible lending.' Business owners can expect tighter credit checks, tougher requirements on down payments, and less room to move around debt service coverage ratios. Some rules affect SBA's popular 7(a) and 504 loan programs, offering government-backed financing for small businesses. The 7(a) program permits loans of up to $5 million for general business needs such as working capital, equipment, or purchasing a company. The 504 program also goes up to $5 million and is geared toward fixed assets like real estate or large machinery. Standing on its plan, Trump's SBA claims the 7(a) program resulted in a 'negative cash flow of about $397 million' in 2024, its first loss in 13 years. The move greatly differs from what was expected if former Vice President Kamala Harris secured the Oval Office. On the campaign trail, she promised to make things easier for Black business owners to thrive with the 'Opportunity Agenda.' According to CNBC, Harris wanted to work with the SBA to give Black entrepreneurs one million fully forgivable loans of up to $20,000 to start a business. Her campaign planned to finance them through partnerships with 'mission-driven lenders,' the SBA, and community-based banks. However, since Trump is here, industry experts like Eric Pacifici of SMB Law Group, which advises small businesses, wonder if the SBA changes are really about safer lending or just a massive attempt to scrub away anything that will remind business owners of an easier time, spearheaded by former President Joe Biden. It's one-part signaling a return to tighter underwriting, but also reads as a somewhat political reset rather than a coherent policy shift,'' the founder said. Regardless, Pacifici feels the changes will be risky for the SBA, as stricter lending standards and rules could squash good deals. Instead of increasing the economic status of business owners who may support Trump, his administration is hurting them with unnecessary moves. RELATED CONTENT:
Yahoo
21-05-2025
- Business
- Yahoo
SBA loans vs. business lines of credit: Which is best for small businesses?
All businesses need funds to operate, but sometimes small businesses may need a financial boost to jump-start growth or get through an off season. The U.S. Small Business Administration (SBA) helps connect small businesses to government-approved lenders who can provide support. However, not all businesses need a large loan. Some may benefit more from flexible access to credit, LegalZoom explains. Both an SBA-backed loan and a business credit line provide businesses with access to necessary funding. However, they differ in how they provide funds and for what purpose. An SBA loan is a long-term, fixed loan designed for major business expenses like real estate, equipment, or expansion. A business line of credit is a revolving credit account that allows businesses to borrow up to a set limit and only pay interest on the amount used. Here are some of the key differences. SBA loans are government-approved loans designed to support small businesses and facilitate a safer, smoother process for both lenders and borrowers. By establishing guidelines and guarantees for business loans, SBA programs reduce lender risk and provide small businesses easier access to necessary capital. Generally, SBA doesn't provide the loans themselves. Instead, they partner with lenders to offer a series of loan programs. Once a business chooses the right program for their financing goals, SBA matches it with a lender. SBA does, however, directly offer low-interest loans to help businesses and homeowners recover from declared disasters. SBA offers four main loan programs. 7(a) loans: Provides up to $5 million in funding to eligible small businesses for various business purposes, such as commercial real estate loans and more. 7(a) Working Capital Pilot (WCP) program: Grants monitored lines of credit to finance a range of needs for growing small businesses, including domestic and/or export purposes. 504 loans: Offers long-term, fixed-rate small business loans of up to $5.5 million to small businesses for assets that promote growth and job creation. Microloans: Provides smaller-sized loans of up to $50,000 to help small businesses and certain nonprofit childcare centers establish and grow their business. Generally, businesses must be creditworthy, registered for-profit organizations, based in the U.S., and meet SBA size requirements to get an SBA-backed loan. That said, each loan program has its own additional requirements. For 7(a) loans: Be an eligible business that tried but was unable to obtain the necessary credit on reasonable terms from a nongovernment source. For 7(a) Working Capital Pilot (WCP) program: Have at least one year of operating history and can produce timely and accurate financial statements, billing and invoicing documentation, and inventory reports. For 504 loans: Have qualified management expertise and a feasible business plan. The tangible net worth of the two prior years is less than $20 million, and the average net income is less than $6.5 million after taxes. For microloans: Depends on the intermediary lender. However, microloan lenders generally require some type of collateral and a personal guarantee from the business owner. While they aren't for every business, there are many benefits to applying for an SBA-backed loan. Longer repayment terms for some loans (up to 25 years for real estate construction or improvements and 10 years for other assets) Lower interest rates on average due to government backing Higher loan amounts available Comparable rates and fees to nonguaranteed loans Continued support to help you start and run your business Lower down payments on average compared to nonguaranteed loans Flexible requirements on how much a business needs to spend on overhead costs to qualify No collateral needed for some loans Longer approval process due to detailed documentation and SBA involvement Stricter eligibility requirements mean not all businesses qualify Some long-term loans have prepayment penalties Must first exhaust nongovernment loan options Rather than providing one large lump sum, a business line of credit allows companies to draw funds up to a predetermined limit, as needed. In this way, a business line of credit is actually more similar to a business credit card than a loan. Additionally, borrowers only need to pay interest on the amount used, not the full available sum. Depending on the lender's policy, businesses can access these funds from a business checking account, checks, bank transfers, or cards linked to the line of credit. There are both secured and unsecured lines of credit depending on the size of the available sum. A larger sum may require you to secure the line with collateral. A business line of credit also differs from an SBA-backed loan in that companies often use it to manage business finances rather than for one specific purpose or purchase. Requirements vary lender to lender. That said, many lenders will require businesses to have consistent revenue, strong cash flow, a detailed business plan, and a good credit score to qualify. Some lenders may also limit eligibility to businesses that have been operating for a fixed amount of time. Like SBA loans, business lines of credit come with their own unique benefits and drawbacks that may influence whether or not the financing option is right for your business. Provides access to funds when required, offering a more flexible financing option Accrues interest on the amount drawn only, not on the full limit Finances various short-term needs, such as managing cash flow or covering unexpected expenses Offers revolving credit, meaning that once you repay the funds, the line of credit replenishes Doesn't require collateral for unsecured lines Tends to offer lower interest rates than business credit cards Variable interest rates, which can lead to fluctuating repayment amounts Typically lower credit limits compared to term loans May require collateral, depending on the lender's terms Often unsecured lines of credit have higher interest rates than secured lines When determining which financing option is right for your business, it's helpful to consider the following factors. Financial needs: Assess whether the funding is for a one-time, substantial investment or recurring, short-term expenses. If you need a large lump sum for a one-time expense, an SBA loan is better. If you need long-term funding that you can access as needed, a business line of credit is better. Repayment ability: Consider your business's cash flow and whether you'd prefer predictable payments or the potential of lower rates. SBA loans—such as the 504 loan—tend to have fixed interest rates, while unsecured business lines of credit tend to offer variable rates. Eligibility: Evaluate your business's ability to meet the specific requirements of each financing option. While eligibility varies, a business line of credit may have more lenient size and credit requirements compared to an SBA-backed loan. Creditworthiness: Depending on your financing needs, maintaining a business line of credit in good standing may help you build your credit rating to prepare for buying an SBA-backed business loan in the future. No matter which financing option you choose, LegalZoom can help you meet eligibility requirements and strengthen your application through various services, including patent or trademark registration. If you still have questions about which route is best for your business, reach out to a business attorney for legal advice based on your unique circumstances. How long does it take to get approved for an SBA loan vs. business line of credit The approval processing time varies by lender for both an SBA-backed loan and a business line of credit. That said, approval for an SBA loan tends to take 5-10 days just to review your application, not including the lender approval process that can take up to a month. A business line of credit can take anywhere from several days to a few weeks. What documents do I need to apply for an SBA loan or a business line of credit? Both financing options typically require formation documents as proof of your business’ legal structure, ownership information, your EIN, and various financial statements. What are the interest rates for SBA loans vs. business lines of credit? For both SBA-backed loans and business lines of credit, interest rates depend on the lender and program. The 504 loan program offers fixed-rate loans, while the 7(a) loans and microloans can be either fixed or variable. Rates generally range between 8%-13%. Interest rates for a business line of credit range significantly by lender, depending on factors like the business owner's creditworthiness, size of the loan, and whether the interest rate is fixed or variable. Do SBA loans have lower interest rates than business lines of credit? While it depends on a number of factors, generally SBA-backed loans can offer lower interest rates compared to business lines of credit due to government guarantees. This article is for informational purposes. This content is not legal advice, it is the expression of the author and has not been evaluated by LegalZoom for accuracy or changes in the law. This story was produced by LegalZoom and reviewed and distributed by Stacker. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Miami Herald
21-05-2025
- Business
- Miami Herald
SBA loans vs. business lines of credit: Which is best for small businesses?
SBA loans vs. business lines of credit: Which is best for small businesses? All businesses need funds to operate, but sometimes small businesses may need a financial boost to jump-start growth or get through an off season. The U.S. Small Business Administration (SBA) helps connect small businesses to government-approved lenders who can provide support. However, not all businesses need a large loan. Some may benefit more from flexible access to credit, LegalZoom explains. SBA loan vs. business credit line at a glance Both an SBA-backed loan and a business credit line provide businesses with access to necessary funding. However, they differ in how they provide funds and for what purpose. An SBA loan is a long-term, fixed loan designed for major business expenses like real estate, equipment, or expansion.A business line of credit is a revolving credit account that allows businesses to borrow up to a set limit and only pay interest on the amount used. Here are some of the key differences. What is an SBA loan? SBA loans are government-approved loans designed to support small businesses and facilitate a safer, smoother process for both lenders and borrowers. By establishing guidelines and guarantees for business loans, SBA programs reduce lender risk and provide small businesses easier access to necessary capital. Generally, SBA doesn't provide the loans themselves. Instead, they partner with lenders to offer a series of loan programs. Once a business chooses the right program for their financing goals, SBA matches it with a lender. SBA does, however, directly offer low-interest loans to help businesses and homeowners recover from declared disasters. Types of SBA loans SBA offers four main loan programs. 7(a) loans: Provides up to $5 million in funding to eligible small businesses for various business purposes, such as commercial real estate loans and more.7(a) Working Capital Pilot (WCP) program: Grants monitored lines of credit to finance a range of needs for growing small businesses, including domestic and/or export purposes.504 loans: Offers long-term, fixed-rate small business loans of up to $5.5 million to small businesses for assets that promote growth and job Provides smaller-sized loans of up to $50,000 to help small businesses and certain nonprofit childcare centers establish and grow their business. Who qualifies for an SBA loan? Generally, businesses must be creditworthy, registered for-profit organizations, based in the U.S., and meet SBA size requirements to get an SBA-backed loan. That said, each loan program has its own additional requirements. For 7(a) loans: Be an eligible business that tried but was unable to obtain the necessary credit on reasonable terms from a nongovernment 7(a) Working Capital Pilot (WCP) program: Have at least one year of operating history and can produce timely and accurate financial statements, billing and invoicing documentation, and inventory 504 loans: Have qualified management expertise and a feasible business plan. The tangible net worth of the two prior years is less than $20 million, and the average net income is less than $6.5 million after microloans: Depends on the intermediary lender. However, microloan lenders generally require some type of collateral and a personal guarantee from the business owner. SBA loan pros and cons While they aren't for every business, there are many benefits to applying for an SBA-backed loan. SBA loan pros Longer repayment terms for some loans (up to 25 years for real estate construction or improvements and 10 years for other assets)Lower interest rates on average due to government backingHigher loan amounts availableComparable rates and fees to nonguaranteed loansContinued support to help you start and run your businessLower down payments on average compared to nonguaranteed loansFlexible requirements on how much a business needs to spend on overhead costs to qualifyNo collateral needed for some loans SBA loan cons Longer approval process due to detailed documentation and SBA involvementStricter eligibility requirements mean not all businesses qualifySome long-term loans have prepayment penaltiesMust first exhaust nongovernment loan options What is a business line of credit? Rather than providing one large lump sum, a business line of credit allows companies to draw funds up to a predetermined limit, as needed. In this way, a business line of credit is actually more similar to a business credit card than a loan. Additionally, borrowers only need to pay interest on the amount used, not the full available sum. Depending on the lender's policy, businesses can access these funds from a business checking account, checks, bank transfers, or cards linked to the line of credit. There are both secured and unsecured lines of credit depending on the size of the available sum. A larger sum may require you to secure the line with collateral. A business line of credit also differs from an SBA-backed loan in that companies often use it to manage business finances rather than for one specific purpose or purchase. Who qualifies for a business line of credit? Requirements vary lender to lender. That said, many lenders will require businesses to have consistent revenue, strong cash flow, a detailed business plan, and a good credit score to qualify. Some lenders may also limit eligibility to businesses that have been operating for a fixed amount of time. Business line of credit pros and cons Like SBA loans, business lines of credit come with their own unique benefits and drawbacks that may influence whether or not the financing option is right for your business. Line of credit pros Provides access to funds when required, offering a more flexible financing optionAccrues interest on the amount drawn only, not on the full limitFinances various short-term needs, such as managing cash flow or covering unexpected expensesOffers revolving credit, meaning that once you repay the funds, the line of credit replenishesDoesn't require collateral for unsecured linesTends to offer lower interest rates than business credit cards Line of credit cons Variable interest rates, which can lead to fluctuating repayment amountsTypically lower credit limits compared to term loansMay require collateral, depending on the lender's termsOften unsecured lines of credit have higher interest rates than secured lines How to choose which financing option is right for you When determining which financing option is right for your business, it's helpful to consider the following factors. Financial needs: Assess whether the funding is for a one-time, substantial investment or recurring, short-term expenses. If you need a large lump sum for a one-time expense, an SBA loan is better. If you need long-term funding that you can access as needed, a business line of credit is ability: Consider your business's cash flow and whether you'd prefer predictable payments or the potential of lower rates. SBA loans-such as the 504 loan-tend to have fixed interest rates, while unsecured business lines of credit tend to offer variable Evaluate your business's ability to meet the specific requirements of each financing option. While eligibility varies, a business line of credit may have more lenient size and credit requirements compared to an SBA-backed Depending on your financing needs, maintaining a business line of credit in good standing may help you build your credit rating to prepare for buying an SBA-backed business loan in the future. No matter which financing option you choose, LegalZoom can help you meet eligibility requirements and strengthen your application through various services, including patent or trademark registration. If you still have questions about which route is best for your business, reach out to a business attorney for legal advice based on your unique circumstances. FAQs How long does it take to get approved for an SBA loan vs. business line of credit The approval processing time varies by lender for both an SBA-backed loan and a business line of credit. That said, approval for an SBA loan tends to take 5-10 days just to review your application, not including the lender approval process that can take up to a month. A business line of credit can take anywhere from several days to a few weeks. What documents do I need to apply for an SBA loan or a business line of credit? Both financing options typically require formation documents as proof of your business’ legal structure, ownership information, your EIN, and various financial statements. What are the interest rates for SBA loans vs. business lines of credit? For both SBA-backed loans and business lines of credit, interest rates depend on the lender and program. The 504 loan program offers fixed-rate loans, while the 7(a) loans and microloans can be either fixed or variable. Rates generally range between 8%-13%. Interest rates for a business line of credit range significantly by lender, depending on factors like the business owner's creditworthiness, size of the loan, and whether the interest rate is fixed or variable. Do SBA loans have lower interest rates than business lines of credit? While it depends on a number of factors, generally SBA-backed loans can offer lower interest rates compared to business lines of credit due to government guarantees. This article is for informational purposes. This content is not legal advice, it is the expression of the author and has not been evaluated by LegalZoom for accuracy or changes in the law. This story was produced by LegalZoom and reviewed and distributed by Stacker. © Stacker Media, LLC.
Forbes
03-05-2025
- Business
- Forbes
Why SME Financing Is Back On The World's Radar
This World Bank and IMF just completed their Annual Spring meetings in Washington, DC. Legions of finance officials from around the world descended upon DC – ostensibly to discuss important issues like job creation, a skilled workforce and fintech's global growth. Unfortunately, tariffs and concern about the overall global economy instead dominated the headlines. The importance of supporting the world's Small and Medium Enterprises (SMEs) has once again become apparent. In a period where multinational corporations are concerned about reshoring, tariffs and political nationalism, SMEs will be critical source of job creation, innovation and local economic growth. But they need financing. New models, such as Liquida Capital, and institutional models, such as the International Finance Corporation's SME Finance Forum, are stepping into the void to provide SMEs with access to important resources to start, grow or scale their businesses. And not a moment too soon. Recent data from Pitchbook shows that 71% of venture capital in the Q1 2025 went to artificial intelligence, which, while important, is not the focus of the vast majority of SMEs. In addition, private investors returned to investing in SMEs in the friendly confines of California, Massachusetts and New York, rather than looking at SMEs around the United States and world. IFC SME Finance Forum 2024 in Brazil In the United States, an interesting model is that of Liquida Capital. Its founder, Andre Dowdell, is a serial entrepreneur who bootstrapped various businesses to success. His frustration with the way that America finances its SMEs – through banks with conservative lending policies or venture capital that is limited to certain cities and sectors, led him to start Liquida Capital. The group connects SMEs to many different sources of capital across the country to find the best, and most willing partner. In 2024 alone, Dowdell and Liquida Capital helped SMEs in the United States raise over $50 million in capital. Since its inception, it has helped over 1500 SMEs in America to access capital for launch or growth. Liquida solves several important challenges facing the small business sector in the United States. Recent changes to the Small Business Administration by the Trump Administration have reduced the amount of SBA-backed loans available around the country. Major banks and community banks relied on these guarantees to support new entrepreneurs. And private investors, like venture capitalists, almost never invest in non-technology or non-science-based businesses. But if an SME is willing to look beyond the narrative of VC as the only option, there is still significant amount of capital in the system. Companies that leverage a broader market to identify willing lenders and investors beyond the reach of the SME geographically or by sector. Liquida Capital Logo At the international level, the International Finance Corporation, and the G20 nations, created the SME Finance Forum to address systemic global challenges to the financial system. They are comprised of SME-focused institutions providing and enabling finance and services- banks, non-banks financial institutions, fintech, payment platforms, development institutions, credit guarantee companies, insurers, investment funds, supply chain linked players, banking and SME associations, policy advocates, regulators, academia, consulting houses, knowledge aggregators. SME's everywhere face the same challenges of access to capital, regulatory burdens and difficulty expanding across borders. The SME Finance Forum has created a network of banks around the world to synchronize lending policies, as well as a set of fintech's that are using traditional capital, crypto and blockchain to improve lending. According to the Forum, fintech is now the leading source of capital for SME's worldwide – as measured by the number of SMEs and not by amount of capital. According to Qamar Saleem, CEO of the SME Finance Forum, 'The SME Forum is proud to work with capital providers around the world, particularly emerging fintech, to support businesses of all sizes'. What path will new entrepreneurs follow? At a startup showcase associated with the World Bank Spring meetings, entrepreneurs talked about the never-ending search for capital that is now stretching across banks, family offices, investors and economic development funds. From biotech startups with intellectual property to small businesses in traditional sectors like transportation, construction and consulting, nobody has found a better way than dialing for dollars in a haphazard manner. For those in the United States, platforms like Liquida Capital provide a new channel through which to find capital and build upon pre-existing lending platforms that have been successful for consumers but not SMEs. Globally, the SME Finance Forum seeks to start a similar discussion but to also include new players in fintech and block chain. The success of these efforts may make life much easier for SMEs in the years to come.
Yahoo
19-02-2025
- Business
- Yahoo
Senate confirms Kelly Loeffler to lead Small Business Administration
The Senate voted Wednesday by a 52–46 margin to confirm the nomination of President Donald Trump's pick to lead the Small Business Administration (SBA). Kelly Loeffler, a prominent business executive and philanthropist who served as a senator from Georgia for two years, will now lead the agency. She unveiled plans during her confirmation hearing to reduce regulatory burdens on small business owners, and enhance access to SBA-backed loans and grants. The agency aims to provide small business owners with counseling, capital and contracting expertise to advance their businesses. Loeffler appeared before the Senate Small Business and Entrepreneurship Committee Jan. 28 to outline her vision and promised that Trump's policies would "restore the small business economy" that would lead to a "golden era of prosperity and growth." Trump's Small Business Administration Nominee Advances To The Senate Floor "That's exactly what the America First agenda does — by ending inflation, cutting taxes, unleashing American energy dominance, slashing regulation, and reining in fraud, waste, and abuse across government," Loeffler said in her opening remarks. Read On The Fox News App Loeffler and her husband, Jeff, created a Fortune 500 financial services and technology company together, and she has told lawmakers she intends to donate her annual $207,500 salary as SBA administrator to charity. Loeffler, whose net worth is estimated at roughly $1 billion, previously donated her annual Senate salary of $174,000 between 2019 and 2021 to more than 40 Georgia charities and nonprofits. Those organizations included food banks, faith groups and organizations opposed to abortion, foster care/adoption groups as well as organizations promoting health care, agriculture, education, law enforcement and disaster relief. The Senate voted Thursday by a 51–43 margin to advance Loeffler's nomination for the final confirmation vote. Chair of the Senate Small Business and Entrepreneurship Committee Sen. Joni Ernst, R-Iowa, backed Loeffler's nomination, citing Loeffler's "zero-tolerance policy for waste, fraud and abuse" within the agency. Additionally, Ernst voiced support for Loeffler's plans to conduct a full-scale audit of the SBA to weed out any wasteful spending. Trump Cabinet Nominee Loeffler Pledged To Donate Salary If Confirmed "Senator Loeffler is immensely qualified for this role," Ernst said on the Senate floor Thursday. "As a successful businesswoman, it is abundantly clear that Senator Loeffler truly understands what it takes to be an entrepreneur and will be an effective voice for small businesses across America." However, ranking member of the Senate Small Business and Entrepreneurship Committee Sen. Ed Markey, D-Mass, pushed back on Loeffler's nomination amid concern that her confirmation would pave the way for the newly created Department of Government Efficiency (DOGE) to "illegally cut off funding" for small business owners. As a result, he said that Trump is looking to fill his cabinet with those that will follow his "illegal bidding." Markey and Loeffler also sparred during her confirmation hearing in January after the Trump administration announced Jan. 27 that it would freeze federal funds and grants that aimed to eradicate "wokeness" and the "weaponization of government." Trump Signs Order Instructing Doge To Massively Cut Federal Workforce While the White House rescinded the memo on Jan. 29, White House press secretary Karoline Leavitt said the federal funding freeze remained in effect. As a result, Markey pressed Loeffler on whether she believed the move was lawful or not, following backlash from members of Congress that the Trump administration attempted to illegally circumvent Congress and withhold funds. Click To Get The Fox News App "I fully agree with President Trump's decision to stop wasteful spending," Loeffler told Markey. "It resulted in a landslide victory that many Americans were waiting for relief against excessive government spending."Original article source: Senate confirms Kelly Loeffler to lead Small Business Administration
