The Ultimate Guide To SBA Community Advantage Loans
Business owners that can’t receive financing through traditional loan programs might take advantage of competitive rates and terms with SBA Community Advantage Loans.
Businesses in underserved areas may have difficulties finding affordable, long-term small business loans. Fortunately, the SBA Community Advantage loan program provides low-cost loans to these underserved borrowers. Keep reading to learn more about this innovative pilot program.
Table of Contents
- What Is The Small Business Administration?
- What Is The SBA Community Advantage Loan Program?
- SBA Community Advantage Loan Rates & Terms
- Community Advantage VS Standard 7(a) Loans
- Eligibility Requirements For SBA Community Advantage Loans
- How To Apply For An SBA Community Advantage Loan
- The Bottom Line On SBA Community Advantage Loans
- SBA Community Advantage Loan FAQs
What Is The Small Business Administration?
The Small Business Administration offers loads of resources for small business owners, including training and educational materials. The SBA also provides business owners with low-interest funding through its SBA loan programs.
The SBA does not provide funding directly to small businesses. Instead, the SBA has created a framework and standards that enable banks, credit unions, and nonprofits to act as intermediary lenders and provide low-interest loans with flexible terms for business owners. Because these loans are backed by the SBA, there is less risk for the lender, so it can feel confident in loaning money to startups and established small businesses.
What Is The SBA Community Advantage Loan Program?
The SBA launched the SBA Community Advantage loan program to help businesses in underserved areas receive low-interest financing with reasonable terms. Business owners that can’t receive financing through traditional loan programs can take advantage of competitive rates and terms through this SBA pilot program.
Because this is an SBA pilot, there is a limited amount of time during which businesses can apply for and receive a Community Advantage loan.
This small-scale project from the SBA will expire on September 30, 2024, after which businesses will have to consider one of the Administration’s other loan programs, such as the 7(a) program.
SBA Community Advantage Loan Rates & Terms
The Community Advantage program provides loans of up to $350,000 to qualifying small businesses. Because 85% of loan funds up to $150,000 and 75% of funds more than $150,000 are guaranteed by the SBA, lenders are more willing to work with businesses that have failed to obtain traditional financing.
Community Advantage loans can be used for almost anything, including:
- Commercial real estate
- Working capital
- Refinancing existing debt
The maximum interest rate for Community Advantage loans is set by the SBA as the prime market rate plus 6.5%. The background of the borrower, including credit score, could affect the interest rate, but it will never go above the SBA’s set maximum.
Terms for these loans are dependent on how the money is used. Equipment purchases and working capital come with a maximum maturity of 10 years, while real estate purchases have a maximum term of 25 years.
Community Advantage VS Standard 7(a) Loans
The SBA Standard 7(a) program is similar to the Community Advantage program with a few key differences.
The maximum loan amount for 7(a) loans is much higher. Borrowers can receive up to $5 million with a 7(a) loan, compared to the $350,000 maximum borrowing limit for the Community Advantage program.
The main difference, though, is who qualifies for each loan. While most small business owners will at least meet the minimum requirements for the Standard 7(a) loan, only businesses in underserved communities will qualify for the Community Advantage program. This provides another funding opportunity for businesses that have limited options for securing a small business loan.
Eligibility Requirements For SBA Community Advantage Loans
There are several requirements that must be met to qualify for an SBA Community Advantage loan.
How To Apply For An SBA Community Advantage Loan
After you’ve determined that you’re qualified for the program, the next step is to begin the application process.
The Bottom Line On SBA Community Advantage Loans
SBA loans can be tedious to apply for and difficult to obtain, but the benefits of these small business loans outweigh the drawbacks. If you operate in an underserved community and need low-interest financing to improve your business, the SBA Community Advantage Program is certainly an option worth considering.