If you’ve previously qualified for a Small Business Administration (SBA) loan, your business has likely benefited from the funds, putting you on a strong financial footing. As your company grows, new expenses may arise to support that expansion. Since SBA loans offer notable advantages, you might wonder: How many SBA loans can you get? Below, explore details about qualifying for multiple SBA loans and how to navigate the process.
Can you apply for an SBA loan twice?
In short, generally yes. Lenders may approve your application for another as long as you continue to meet the minimum requirements for SBA loans. For your business to qualify for a second SBA loan, it generally must demonstrate ongoing profitability and have a credit score that satisfies the lender’s standards. The requested funding must also fall within the loan program’s borrowing limits.
It’s also essential that your current SBA loan is in good standing. Lenders approved your first loan based on your repayment ability. They may hesitate to approve new funding if you’ve missed payments or defaulted.
Example of having multiple SBA loans
Can you have two SBA loans? The answer is generally yes, as long as your total funding remains within each program’s borrowing limits. For example, SBA 7(a) loans through SmartBiz® allow borrowing up to $500,000. If you’ve already secured $150,000, you may still qualify for up to $350,000 more under the same program.
Additionally, SBA loans can be paired with other financing types. For instance, after borrowing $350,000 through an SBA 7(a) loan, you might add $100,000 from a non-SBA term loan. By combining funding options strategically, you may access the capital necessary to support your business’s growth and operations.
How many SBA loans can you have at one time?
The number of SBA loans you may qualify for generally depends on your ability to meet eligibility criteria and the aggregate funding limits of each loan program. While there isn’t a strict cap on the number of loans you can hold, lenders assess whether your business can manage additional debt. Borrowers with strong financials, steady cash flow, and a robust repayment history often have higher approval odds.
Can you hold different types of SBA loans?
Yes, it’s generally possible to hold multiple types of SBA loans simultaneously. For example, a borrower might use an SBA 7(a) loan for working capital and an SBA 504 loan for purchasing real estate or equipment. Each loan type serves a specific purpose, and combining them may help meet diverse business needs. Lenders will evaluate your financial profile and ensure that the loans collectively align with SBA requirements.
Can you refinance an SBA loan with another SBA loan?
Yes, you may be able to refinance an SBA loan with another SBA loan, but the process typically requires lender approval. SBA refinancing is often used to secure lower interest rates, adjust repayment terms, or consolidate debt for better cash flow management. The original loan must usually be current, with no late payments or defaults.
To determine whether you qualify, lenders may assess your credit, repayment history, and business performance. It’s important to note that refinancing one SBA loan with another is subject to SBA regulations and the lender’s discretion.
What is the maximum amount you can borrow across multiple SBA loans?
The SBA maximum loan amount varies by program. For SBA 7(a) loans, the cap is $5 million per borrower. If your business requires additional funding, you may consider exploring other SBA options or combine an SBA loan with non-SBA financing. Lenders will consider the cumulative borrowing total to ensure it aligns with your business’s financial capacity.
Do you need to fully pay off your first SBA loan before applying for a second?
In most cases, you don’t need to fully pay off an existing SBA loan to apply for another. However, your first loan must be in good standing, with consistent on-time payments and no delinquencies. Lenders often view repayment reliability as a strong indicator of your ability to manage additional debt. If your business can demonstrate healthy cash flow and a clear purpose for the new loan, lenders may be more likely to approve your application.
Do interest rates change when applying for the first SBA loan versus the second?
Interest rates for SBA loans generally remain consistent across applications, as they’re tied to the prime rate and SBA guidelines. However, lenders may adjust the terms based on your updated credit profile, business financials, and market conditions. Borrowers with improved credit scores or stronger revenue streams may secure more favorable terms for subsequent loans. Conversely, if your financial standing has declined, rates may reflect the increased risk.
Pros and cons of having multiple SBA loans
Multiple SBA loans may be beneficial for your business, but since loans are debts, there’s generally some risk involved. Before committing to additional debt, weigh the advantages and disadvantages carefully.
The pros of multiple SBA loans
Some reasons you might benefit from multiple SBA loans include:
- Large loan amounts. SBA loans may provide significant funding, with limits tailored to meet the needs of small business owners. For instance, the SBA maximum loan from SmartBiz is up to $500,000.
- Favorable terms. SBA loans feature competitive rates and extended repayment terms. A 10-year repayment schedule may lower your monthly payments and improve cash flow.
The cons of multiple SBA loans
Some reasons why you might think twice about taking out more than one SBA loan include:
- Lengthy application processes. A second SBA loan typically requires a full application and underwriting process. Previous approval doesn’t automatically guarantee a faster timeline.
- Personal risk. SBA loans typically do not require collateral. Instead, they require a lien on business assets. Taking on multiple SBA loans may lead to greater lender claims on your assets and increase your financial risks.
Maintain SBA loan eligibility
Applying for a second SBA loan generally means continuing to meet the requirements. If you were eligible for the first loan, you’d likely qualify for the second, but it’s not a sure thing. Some steps that may help improve your chances include:
1. Meet the basic loan requirements
There are several basic requirements your business must meet to be eligible for SBA loans. Some of the criteria that your business generally must meet are:
- It has to be a for-profit venture
- It needs to operate within the United States
- It must belong to an SBA-approved industry
- You must have invested your own time and money into the business
- It needs to meet the SBA definition of a small business
2. Keep a good credit score
The minimum credit score required to qualify for many types of SBA loans is typically 640, though the higher, the better. It’s typically best to have a score higher than the minimum if you’re applying for a second loan. This generally helps reinforce your reliability as a borrower and reduces the potential financial risk of lending to your company. To apply for an SBA 7(a) loan from a bank in the SmartBiz network, a credit score above 650 is required.
3. Be in good standing on your current loans
Typically, the best way to convince your lender that you can handle additional debt is to consistently pay your current debts. Missing a payment here or there generally won’t hurt your chances too much, but if you’re regularly missing payments, the lender typically won’t consider lending you more money.
4. Create a robust business plan
Telling an SBA lender what you plan to do with a loan may help you qualify. Financial institutions will generally want to know that the added working capital is going toward something that will increase your revenue. This way, you may more reliably pay off your debts. That’s where your business plan can come into play. This document details your strategy for using the added capital. It may help to convince the loan agent that you’ll consistently make monthly payments. Note that the banks in the SmartBiz network do not require a business plan.
5. Set up the potential for long-term success
Lenders typically don’t just look at whether your planned upgrades will generate new profits – they look at whether your funding will benefit your business long-term. SBA loans have a repayment period of 10 years, and the lender generally needs to be reassured that your business will last.
Determining future success isn’t an exact science, but lenders may come close when they know your debt service coverage ratio (DSCR). This figure is the ratio of your business’s annual net operating income and its annual debt service. The result represents how many times over you can pay your current debt obligations. Most lenders typically look for a DSCR of at least 1.0.
Thinking of securing a second SBA loan?
If your business is growing and you’re ready to tackle new opportunities, securing a second SBA loan may provide the capital you need. Multiple loans may help fund different aspects of your business, from day-to-day operations to expansion projects. Before applying, ensure your financial records are up to date, and be prepared to demonstrate how the additional funds will drive growth.
A good repayment history and strong financial performance are key to building trust with lenders. Even if you meet all eligibility requirements, it’s important to assess your business’s long-term financial capacity. Carefully review your business plan and use financial metrics like cash flow and debt service coverage ratio (DSCR) to support your application. By planning strategically, you may set your business up for lasting success.
