SBA Community Advantage Loans
SBA community advantage loans provide financing up to $250k with repayment terms between 7 - 25 years.
OVERVIEW
SBA Community Advantage Loans helps small businesses in underserved markets by providing loans up to $250,000 through mission-focused, community-based lenders. The SBA Community Advantage loan proceeds can be used to finance a company, as working capital, to expand an existing small business, or to purchase commercial real estate.
SmartBiz is a nationwide SBA loan provider that offers SBA loans up to $250,000. They provide a comprehensive and simple online application process that can get you prequalified in minutes.
Free Guide To
Small Business Financing
How SBA Community Advantage Loans Work
SBA Community Advantage Loan at a Glance
| Maximum Loan Amount | Up to $250,000 |
| Interest Rate | Prime Rate + 6% |
| Repayment Terms | 7 to 10 years for working capital and startup expenses Up to 25 years for real estate purchase |
| Minimum Requirements | For-profit small businesses in underserved markets Borrowers must be creditworthy |
If you are planning to apply for SBA Community Advantage Loan, the first step that you must do is to ensure that your business fits the requirements of the program. When you are sure that your business is eligible, you can follow these steps:
1. Find a Community Advantage Lender in Your Area
The SBA has approved over 100 community advantage lenders. Organizations that participate in Community Advantage programs as lenders include the CDC, Microloan Intermediaries, and CDFI.
2. Prepare the Necessary Documentation Requirements
To make your loan application process faster, it is necessary to come prepared. This is especially true when it comes to your business financials and other documentation requirements. The following are the basic financial documents that you need to prepare:
- 3 years of personal tax returns
- 3 years of business tax returns
- SBA-approved Personal Financial Statement
- Business plan with 2-year financial projections
- For startups, proof of down payment (at least 20% or more)
3. Wait for Approval and Get Funded
The turnaround time for approval depends upon how complete your requirements are and how fast your lender evaluates your qualifications. Usually, Community Advantage loans tend to take longer to underwrite and close than other small business loans, because Community Advantage loans are underwritten by the lender and then approved by the SBA.
After the Community Advantage lender decides to move forward with a loan request, it may take another 30 days or so to finish the final underwriting, SBA approval, and the final closing of the loan. Many factors can influence the loan closing turnaround time, but being prepared and ready to respond to the lender’s requests for information will definitely help shorten the wait.
SBA Community Advantage Loan Qualifications
The loan eligibility requirements for SBA Community Advantage Loans are the same as for SBA 7(a) loans, such as the following:
- The business must be operational
- It must be organized for profit
- It is located in the United States
- It is a small business as defined by SBA (have less than 500 employees and less than $15 million assets)
- Be able to demonstrate the need for financing
There are some industries which are considered as ineligible for SBA loan programs due to government restrictions. You may check a list of eligible industries for more information.
In addition to the eligibility requirements above, in order to qualify for SBA Community Advantage Loan program, the borrower must be creditworthy in order to reasonably assure repayment. To have an acceptable creditworthiness, the following are taken into consideration:
- The credit history of the applicant
- The strength of the business
- Past earnings, projected cash flow, and future prospects
- The applicant’s ability to repay the loan with earnings from the business
- Collaterals may be required
Although you must provide creditworthiness and demonstrate your business plans, qualification for SBA Community Advantage Loan program is not limited by the size of your business’s balance sheet or the amount of collateral involved. There are other factors that lenders will consider before they approve your application.
Lenders will personally talk to you to establish your level of expertise on your business, your business plans, and how you intend to use the funds from the loan. Unlike traditional financing institutions, the Community Advantage lenders demonstrate flexibility in their lending criteria in accordance with the SBA guidelines.
SBA Community Advantage Loans: Terms, Rates, and Costs
One of the benefits of an SBA Community Advantage loan is that it offers an affordable financing option for longer repayment terms. Also, the use of the proceeds from community advantage loans is also flexible. The loan terms are dependent on how the proceeds will be used, and revolving lines are not allowed.
Loan Terms of SBA Community Advantage Loans
- 7 to 10 years - For working capital, inventory, business acquisitions, tenant improvements, equipment, and start-up expenses
- Up to 25 years - Commercial real estate
The interest rates of SBA Community Advantage loans are reasonably affordable compared to other alternative business loans for companies that cannot get approved for traditional financing. The maximum interest rate of SBA Community Advantage loan is the Prime Rate plus 6%. The typical total interest rates range from 7% to 9%.
Other fees that are associated with Community Advantage Loans include:
- SBA Guaranty Fee - up to 3% - 3.75%, charged on the guaranteed portion of the loan
- Ongoing Fees - up to 0.473%, charged to lenders but may be passed to the borrowers
Bottom Line
SBA Community Advantage Loan Program is meant to help small businesses and startups get started from scratch to start building the business, even without sufficient business credit history. They also provide mentoring and education on top of financing, so this loan may just be exactly what you need for your business to succeed.
If your business is in need of SBA loans, our recommended provider is SmartBiz, which is a nationwide SBA lender. Their simple online application process can be completed in a few minutes, and you can get funded in as fast as 30 days.
Venture Capital Details:
Maximum Investment Amount
$250k
Typical Investment Term
7 - 25 years
Typical Interest Rates
Prime rate + 6%
Speed
Varies
Down Payment?
Yes
Collateral
N/A
Personal Guarantee?
Yes
Have a question?
Pros
More flexible qualifications especially when it comes to credit history.
Available for startups.
Longer repayment terms available.
Funds may be used for almost anything business-related.
Cons
Application process and approval may take longer compared to traditional loans.
It will be difficult to apply if the business is not located in an area where community advantage lenders are not available.
How to Apply
Answer Simple Questions
Browse Your Loan Options
Get Funded in Record Time
APPLY NOW
Additional Resources
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