If you’ve previously qualified for a Small Business Administration (SBA) loan, your business is most likely in good shape, having benefited from the funds. As your company grows, there will probably be additional expenses to help further fuel its expansion. With SBA loans offering such great benefits, you might want to apply again – but can you apply for an SBA loan twice? Below, learn some more information about how you may be able to secure multiple SBA loans for your business.
In short, generally, yes. If you continue to meet the minimum requirements for your current SBA loan, lenders typically should have no problem approving you for another. Your business will need to be profitable with a good credit score. The amount of funding you ask for also likely needs to be within the loan program’s borrowing limits.
Additionally, when applying for a second SBA loan, your first must be in good standing. Your first loan application went through because the lender judged that you could reliably repay the loan. If that proved to be untrue, they’d likely hesitate to give you more funding.
You can have multiple SBA loans with funding totals up to each program’s borrowing limits. For example, SBA 7(a) loans from a bank in the SmartBiz® network have a limit of $350,000. If you borrow $150,000 with an SBA 7(a) loan, you can typically still borrow up to another $200,000. Additionally, you can generally receive $350,000 from an SBA 7(a) loan and still get an additional $100,000 from a non-SBA loan.
Multiple SBA loans may be beneficial for your business, but since loans are debts, there’s generally some risk involved. Before committing to another small business loan, you will likely want to consider all the possible advantages and disadvantages.
Some reasons you might benefit from multiple SBA loans include:
Some reasons why you might think twice about taking out more than one SBA loan include:
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. Considering some of the tips below may help you qualify the second time around.
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:
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.
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 likely won’t hurt your chances too much, but if you’re regularly missing payments, the lender typically doesn’t have much reason to lend you more money.
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.
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.
Before you apply for a second SBA loan, you have to find the right lender. Researching financial institutions can be time-consuming, but SmartBiz helps to speed up the process by matching you to the lender most likely to fund your loan. You won’t waste time going from bank to bank. Check now whether you-pre qualify* for a second SBA loan – and if not, SmartBiz may be able to help connect your business with other high-quality funding options including bank term loans and custom financing.