In many ways, small businesses are the backbone of the United States. Small businesses employ nearly half of the American workforce and have been responsible for 66% of job creation over the past twenty-five years. Luckily, the U.S. recognizes the importance of small businesses and offers programs to support them. For example, the U.S. Small Business Administration (SBA) issues loans through approved lenders to provide entrepreneurs and small businesses the capital they need to thrive.
These are referred to as SBA loans, but that term covers a wide variety of programs, the intricacies of which can get fairly complicated. In this post, we’ll provide an introduction to SBA loans, what kind of programs are offered, how many loans the SBA typically provides, and how a green card holder may stand to benefit.
If you’re looking for more detail into the specifics of each program, check out our blog on The Advantages of SBA Loans.
What Is an SBA Loan?
SBA loans are small business loans that are backed by the U.S. government, taking some of the risks off of the lender. Put simply, the SBA guarantees it will repay a portion of the loan even if the borrower cannot. Depending on the size and type of the loan, the SBA can cover up to 85% of the loan amount!
Because these loans are federally backed, lenders can approve loans for higher amounts than the small business could qualify for alone (if they qualify at all). SBA loans also come with better terms, like lower interest rates and negotiable repayment plans, making them a popular choice.
SBA loans can be used for many purposes. The SBA considers several factors, including unique circumstances, so there’s no exact rubric for approved purposes. However, SBA loans are often used to cover start-up expenses, refinance current business debt, provide short- and long-term capital, or purchase assets, like real estate, equipment, and supplies.
How Many Loans Does the SBA Issue Per Year?
In Fiscal Year (FY) 2021, the most recent year for which data is available, the SBA’s core lending programs delivered more than 61,000 loans, totaling $44.8 billion in funding to small businesses.
However, we can’t forget that the COVID-19 Pandemic has heavily impacted the most recent statistics on SBA loans. In response to the global pandemic in 2020, the SBA delivered a record number of its traditional loans and scaled up COVID-related economic relief throughout 2021. In 2021 alone, the SBA distributed nearly $416.3 billion in emergency relief aid to more than 6 million impacted small businesses.
As America continues recovering from the economic impacts of COVID-19, we can expect that the types, volumes, and amounts of SBA loans may change.
What Are the Programs Offered by the SBA?
As we mentioned, there are a lot of SBA loan programs, and each of them has its own requirements, limitations, and benefits. Broadly speaking, the SBA offers the following:
7(a) loans
Approved Purposes: Refinancing debt, expansion, construction, purchasing land or a business, buying equipment or fixtures, working capital, startup expenses, seasonal line of credit, inventory, and more.
Maximum Loan Amount: $5 million
504 Loans
Approved Purposes: Purchasing long-term fixed assets, like land, facilities, heavy equipment, or machinery. But 504 loans must be provided through Certified Development Companies (CDCs), which are licensed by the SBA.
Maximum Loan Amount: $5.5 million.
SBA Express Loans
Approved Purposes: Same as 7(a) loans, but with expedited processing.
Maximum Loan Amount: $500,000
Economic Injury Disaster Loans (EIDL)
Approved Purposes: Recovery of losses tied to a declared disaster or emergency that are not covered by insurance or the Federal Emergency Management Agency (FEMA).
Maximum Loan Amount: $2 million.
Microloans
Approved Purposes: Refinancing debt, working capital, supplies, machinery, equipment, and more. Cannot be used for real estate.
Maximum Loan Amount: $50,000
CAPLines
Approved Purposes: Seasonal and/or short-term working capital, costs to perform contracts, construction costs, advances against existing inventory, consolidation of short-term debts, and more.
Maximum Loan Amount: $5 million
Community Advantage
Approved Purposes: Same as 7(a). But lenders must be mission-focused and target underserved markets. Cannot be used for revolving credit.
Maximum Loan Amount: $350,000
International Trade
Approved Purposes: Long-term funding to expand export sales or modernize in order to compete more effectively in the international marketplace.
Maximum Loan Amount: $5 million
Export Working Capital Program
Approved Purposes: Working capital to support direct or indirect export sales without disrupting domestic financing and business plan.
Maximum Loan Amount: $5 million
Export Express
Approved Purposes: Same as Export Working Capital Program, but with expedited funding to enhance a business’s direct or indirect export development.
Maximum Loan Amount: $500,000
Remember that each loan is evaluated on the unique factors impacting the business. There may be more approved purposes than listed.
Can a Nonimmigrant Receive an SBA Loan?
The short answer is: maybe. SBA loan requirements for nonimmigrants are intense, and not everyone will qualify. But there are certainly those who can qualify, so it’s worth exploring further.
The SBA reports that legal aliens are eligible for its programs. However, the applicant business must be owned at least 51% by U.S. citizen(s) or non-U.S. citizen(s) in the country legally, such as a legal permanent resident (LPR) with a Green Card. If the individual is not an LPR, they must be one of the following:
A documented alien admitted to the U.S. for a limited time and specific purpose
An asylee or refugee with LPR status
An alien subject to the Immigration Reform and Control Act of 1986
The SBA also considers the type of status possessed in determining the degree of risk relating to the continuity of the applicant's business. Those determined to be high risk are often required to hold sufficient U.S.-based collateral to pay the entire loan at any time during its term. That’s a high bar to meet.
Because of the complexity of this determination, the SBA recommends that those seeking more detail about whether or not they are eligible as a non-U.S. citizen visit their local SBA office to find out more.
At Visa Business Plans, we certainly agree that pursuing an SBA loan isn’t a challenge to take on alone. Submitting a solid business plan with your SBA loan application can greatly increase your odds of success! If you’re considering applying for an SBA loan, Contact Us for a free consultation.
Visa Business Plans is led by Marco Scanu, a certified coach from the University of Miami with a globally-based practice coaching Fortune 1000 company executives, entrepreneurs, as well as professionals in four different continents. Mr. Scanu advises clients on turnaround strategies and crisis management.
Mr. Scanu received a bachelor’s degree in Business Administration (Cum Laude) from the University of Florida and an MBA in Management from Bocconi University in Milan, Italy. Mr. Scanu was also a Visiting Scholar at Michigan State University under the prestigious H. Humphrey Fellowship (Fulbright program) with a focus on Entrepreneurship, Venture Capital, and high-growth enterprises.
At present, Mr. Scanu is the managing partner and CEO at Visa Business Plans, a Miami-based boutique consulting firm providing attorneys and investors with business planning services in the areas of U.S. and Canadian immigration, SBA loans, and others.
[1] https://www.forbes.com/advisor/business/small-business-statistics/
[2] https://cdn.advocacy.sba.gov/wp-content/uploads/2022/04/22141927/Small-Business-Job-Creation-Fact-Sheet-Apr2022.pdf
[3] https://www.sba.gov/article/2021/nov/24/fact-sheet-us-small-business-administration-delivering-support-americas-small-businesses-helping
[4] https://www.sba.gov/partners/lenders/7a-loan-program/terms-conditions-eligibility
[5] https://www.sba.gov/partners/lenders/7a-loan-program/terms-conditions-eligibility
[6] https://www.sba.gov/partners/lenders/7a-loan-program/terms-conditions-eligibility
