This guest article was provided to us by Accion. Accion is a nonprofit that provides microloans to small businesses. You can visit their site here.

Your Guide To The SBA Community Advantage Loan Program

Starting a business takes money, and finding that money isn’t always easy. Traditional bank financing is a great option if you have a strong business credit history, but it may not be accessible to people without a long, successful track record. If you haven’t been able to secure traditional bank financing for your small business, it’s time to look for alternatives – like the SBA Community Advantage Loan Program.  

There’s a well-established process for handling a loan application. You look at the borrower’s financial information and credit history and feed that information into a program that measures the riskiness of the loan. It’s a yes-or-no question. But that’s not necessarily the best fit for people without long credit histories that want to start a new business. So the Community Advantage program looks at factors beyond the numbers when giving out loans.

SBA’s Community Advantage Loan Program: The Basics

The SBA Community Advantage Loan Program is designed to provide financing to small business owners that haven’t been able to get a traditional bank loan. They offer microloans for $50,000 – $250,000 through community-based lenders. There are more than 100 of these local Community Advantage lenders around the country, so they’re easy to access.

The loan terms are structured to be manageable for small business. Interest rates typically range from 7-9% and the payback terms can stretch out to a decade. That makes monthly payments lower so it’s easier to keep up. And most importantly, the qualifications for an SBA Community Advantage loan are less demanding than those required by most traditional lenders, which makes it easier for you to get the financing you need.

This program isn’t just about giving loans to people that can’t get them from the bank. It’s specifically designed to help startups achieve success. So, the SBA provides mentoring, education, and other support resources to Community Advantage loan recipients to help ensure that they have the tools they need to succeed.

Getting Your SBA Community Advantage Loan

The first step is making sure you fit the requirements of the program. First, only small businesses qualify. That means fewer than 500 employees and less than $15 million in assets. You also have to be for-profit. Startups and existing businesses are both welcome, but note that certain industries are ineligible for the program due to government restrictions.

If you can check all those boxes, then it’s time to start your application. As with any loan application you’ll need some basic financial documents, including:

• 3 years of personal tax returns
• 3 years of business tax returns
• SBA-approved Personal Financial Statement
• Business plan with 2-year financial projections
• Proof of down payment into the business

The Community Lender will also run your personal and (if available) business credit history.

This is all similar to the process a traditional lender uses; they take that information and calculate how risky the loan would be. For this program, however, your Community Advantage Lender will also take certain other factors into account. For one, they’ll talk to you personally. They want to know about your level of experience in running a business and about your plans for the loan proceeds and the future of your business. These extra steps make the process a little more time-consuming than a traditional bank loan.

Essentially, the program is designed to move beyond the numbers and help potential lenders get to know you personally. Your credit history often doesn’t give lenders the full picture when it comes to how you’ll handle a business loan so the Community Advantage Lenders work hard to get a sense of who you are as a person. You know that you’re creditworthy and you’ll have the chance to explain that, rather than being stuck with just your technical credit records.

The Bottom Line

It’s really tough to get a leg up in the business world. You need business credit to get a business loan but you need a business loan to get business credit – how can a small business break into that cycle? And that’s where the SBA Community Advantage Loan Program comes in. It’s meant to help you get started from scratch so that you can start building your business and your business credit. Between the money and the mentoring and education, this loan may be exactly what you need to take your business to the next level. So visit a local Community Advantage Lender like Accion to learn more about whether this program is a good fit for you – and how to get started!