Finance
Sunbelt Finance knows how to get you pre-qualified for an SBA loan. We understand the challenges and responsibilities that come with business ownership. Our services are at no cost to the buyer and are paid for by the lender after you successfully attain the loan.
The 5 C’s of SBA Loan Eligibility
Capital
Capital refers to the down payment—or equity injection—you invest in the business. SBA lenders rarely finance 100% of the project, so showing a strong personal investment is critical. For SBA 7(a) loans, banks typically want 20% down for existing businesses or franchises, though 10% may be accepted for highly qualified buyers. The exact amount required depends on your loan type and business profile.
Credit
Just as it does when you apply for any kind of financing, your credit score and credit history play a role in whether you’re approved for SBA lending. Most banks will look at both your personal and business FICO score. A 690 personal score and 160 business score are typically the minimum requirements for loan approval. Credit events such as recent bankruptcy can have a significant negative impact on your attractiveness as a borrower.
Capacity
Capacity refers to your business’s ability to generate enough cash flow to repay debt, measured by the debt service coverage ratio (DSCR)—operating cash flow divided by debt obligations. Lenders typically require a DSCR of at least 1.25 and will review recent tax returns, profit & loss statements, and balance sheets. They also assess your debt-to-income ratio (DTI) to gauge personal financial health, aiming for DTIs below 36%. Strong personal income can help improve loan eligibility.
Character
Lenders look at both your personal and your business character when evaluating your strength as a borrower. Most importantly, your business experience—especially in the industry of the business you’re hoping to fund—will play a factor in the eyes of lenders. However, you’re also required to provide information about events in your personal history that speak to your personal character, such as details about child support payments, criminal convictions, and recent arrests.
Collateral
Your personal property may be used as collateral to secure your loan. For example, the bank may take a lien against your primary residence to use as security if the loan goes into default. However, unlike the other eligibility requirements, it’s possible you may not be denied a loan if you don’t have enough collateral to secure it—as long as all other requirements are met.
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If you need help with larger, more complex deals, Masterworks Capital embraces the same mindset as Sunbelt Business Advisors, with a sharper lens for the $10M–$250M range.
Visit: www.mworkscapital.com
