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What Types of SBA Loans Are Available to Tennessee Businesses?

Small Business | SouthEast Bank | October 31, 2022

If you are starting a business in Tennessee or have started a business, chances are you have heard of SBA loans. They are special loans for small businesses backed by the Small Business Administration and are excellent sources of capital for a growing business or one just beginning.
 
However, there is more than one type of SBA loan available to Tennessee businesses, ranging from small microloans to larger 7(a) loans. With several options to choose from, trying to find the right one for you can be a bit confusing, but we can help. Below you will find a compiled list of the available SBA loans, who qualifies for them, and how to apply. 

SBA Loans for Small Businesses in Tennessee 

There are a total of six SBA loans available to small businesses in Tennessee. Some of these loans are more popular than others, such as the SBA 7(a), but which loan is right for you will depend on the type of business you are running, how much money you need, and what that money will be used for. 

To understand what SBA loan you can qualify for, refer to this list and talk to your lender, who can make sure you are applying for the right one. 

Types of SBA loans

  • SBA (7a) Loans - Capital up to $5 million 
  • SBA CDC/504 Loans - Primarily for purchasing commercial real estate
  • SBA CAPLines - Credit lines that can be used again
  • SBA Export Loans - For those who export 
  • SBA Microloans - Small loans up to $50,000
  • SBA Disaster Loans - For Businesses that have experienced natural or economic disasters

 

SBA (7a) loans

SBA (7a) loans are the most common type of SBA loan as they can be used for many items, including working capital, refinancing debt, purchasing a business, buying real estate, or buying equipment. These loans have longer repayment terms and often lower interest rates than other business loans. The maximum amount for an SBA (7a) loan is up to $5 million

Minimum Requirements: 

  • 680 credit score
  • 10% to 20% down payment
  • Personal Guarantee
  • Some collateral available

 

CDC/504 SBA loans

If you are a small business looking to buy owner-occupied commercial real estate, then a CDC/504 SBA loan is the one for you. A CDC, or community development corporation, partners with a bank or lender to fund the project. The borrower will also need to make a small down payment contribution with this loan.

CDC/504 loan funding can be used to buy new assets such as equipment, buildings, and machinery. It can also be used to make improvements on current buildings or build new ones. The loan cannot be used for inventory or debt; instead, look to the SBA (7a) loans for that. The maximum amount given is up to $5 million

Minimum Requirements:

  • Operate a for-profit company in the United States
  • Have a tangible net income of less than $15 million
  • Have an average net income of less than $5 million after federal income taxes

 

SBA CAPlines loans

SBA CAPlines loan program is an excellent choice for businesses looking to meet their working capital needs, as it is essentially a line of credit. It is similar to the SBA (7a) loan in that the maximum amount is $5 million, and the money can be used for a variety of purchases. The difference is that because it’s a line of credit, interest only builds on what has been spent instead of the total amount of the loan. 

The SBA has four different lines available to help small businesses, each with its own set of requirements, although they must all meet the same requirements as the SBA (7a) loan as well.

Seasonal CAPline - A line that can only be used to fill in seasonal or cyclical cash flow caps, such as increasing inventory during the holidays. The CAPline can be used to pay for labor costs as well. 

Minimum Requirements: 

  • Operating for at least one year
  • Have no existing debt
  • Prove that your business has a pattern of seasonal activity

Contract CAPline - As the name implies, contract CAPline funding goes towards projects associated with contracts, such as labor and materials. This can be anything from a new web application to a building contract. 

Minimum Requirements: 

  • Show that you have profited from similar contracts before
  • Demonstrate the ability to project costs accurately and perform the work while under contract
  • Have the financial ability and knowledge to complete the contract in the allotted timeline with a profit

Builders CAPLine - Builders CAPLines are used to help fund the construction of commercial or residential real estate, including any renovations and labor costs.

 Minimum Requirements: 

  • Show that you have profited from similar contracts before
  • Demonstrate the ability to project costs accurately and perform the work while under contract
  • Have the financial ability and knowledge to complete the contract in the allotted timeline with a profit 

Working Capital - One of the broader CAPlines, this line can be used to cover ongoing business expenses, including labor, supplies, and even invoices. 

Minimum Requirements: 

  • You have enough collateral - Your assets will be used to cover this SBA line.
  • Must have inventory
  • No existing debt

 

SBA export loans 

SBA export loans are designed to help small businesses in America engage in internal transactions and boost their export business. There are three types of SBA Export Loans: Export Express, Export Working Capital, and International Trade. As with most other SBA loans, the maximum amount is $5 million

Minimum Requirements:

  • Businesses must be part of exporting goods or services to international companies.
  • For the Export Express Loan, the business must be at least one year old
  • Credit score of 680

 

SBA microloans

SBA microloans are another common loan that small businesses may hear about when looking into SBA loans. They are loans intended for for-profit small businesses and nonprofit childcare centers. They are not guaranteed by the SBA, but instead the loans are given to intermediary lenders that lend it to a small business. They have a maximum amount of $50,000, though they are often smaller in practice. 

Minimum Requirements: 

  • 640 credit score, though it may be different based on the lender 
  • The loan must be used to start a new business or expand a current business; it cannot be used to refinance debt or buy real estate
  • Some childcare centers may qualify 

SBA disaster loans 

SBA disaster loans gained notice over the course of the COVID-19 Pandemic, when the SBA implemented the COVID-19 EIDL program. Although that program has ended, small businesses suffering from declared economic or environmental disasters can still apply for SBA disaster loans. They are most often used to fill insurance gaps or keep businesses running during national hardships. SBA disaster loans have a maximum of up to $2 million

Minimum Requirements: 

  • Minimum credit score of 575 for loans up to $500,000
  • Minimum credit score of 625 for loans above $500,000
  • Business must have suffered from economic damage or physical, environmental disaster
  • Must be located in an SBA declared disaster area

Finding the Right SBA Loans in Tennessee

Research is key when looking for the right SBA loan for your small business in Tennessee. You will want to understand what you are applying for and if your business qualifies for the capital to avoid wasting time and energy on a loan that you don’t qualify for.

When you have decided on the right loan, be sure to have all of the necessary paperwork available and completed before applying. Some of the loans may also require some collateral or a down payment. 

If you find yourself struggling to make sense of the complicated world of SBA loans, reach out to one of our highly-qualified lenders at SouthEast Bank. We can work with you to explain any questions you may have, and together we can find the right SBA loan for you. 


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Information contained in this blog is for educational and informational purposes only. Nothing contained in this blog should be construed as legal or tax advice. An attorney or tax advisor should be consulted for advice on specific issues.
 

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