Want to Take Out Multiple SBA Loans? Here’s What to Know
If you have lofty business goals, applying for multiple SBA loans can be a convenient way to fund those goals. But before you burn the midnight oil filling out applications, there are several considerations that you, as a small business owner, should make before making several hard inquiries on your credit.
In this article, we discuss a few things that you should bear in mind before applying for more than one SBA loan.
How Many SBA Loans Can You Apply For?
SBA loans are highly competitive for a reason: They are guaranteed by the federal government, reducing risk for lenders and allowing them to offer more favorable interest rates. With this in mind, it’s no wonder why small business owners might opt for multiple SBA loans. And, just like other loans, you are able to apply for an unlimited number of SBA loans as long as you don’t exceed the SBA’s loan program borrowing limits.
But just because you can apply for multiple SBA loans doesn’t mean you’ll be approved immediately. SBA loans have stringent requirements as well as a processing time that often takes months. Continue reading for general SBA loan requirements and timely financing alternatives.
General Criteria To Be Eligible for Multiple SBA Loans
The SBA requires that each applicant show proof of:
- U.S. citizenship or residency
- For-profit business ownership
- Adequate collateral
- Meet lender-specific requirements
The requirements for applying for multiple SBA loans are the same as applying for a single loan. That being said, lenders may be more vigilant because the debt you’ve incurred from multiple loans makes you a higher risk applicant.
To prove your ability to meet payments, your debt-to-income ratio ratio should not exceed 70% — which is the industry standard for most banks. Your credit score should also be at least 680. In addition, you need to show proof that you have a long-term source of income and/or place a collateral against every SBA loan you qualify for. This means that the value of your assets should be able to support each of your loan requests.
Is Applying for Multiple SBA Loans a Good Idea?
There are advantages and disadvantages of applying for multiple SBA loans.
On the one hand, this can be a cost-effective way to fund your small business as interest rates are usually low. On the other hand, it can take months to be approved and exposes your business to risk if something were to go wrong.
Multiple SBA loans are helpful when used responsibly. They can be a great tool for getting extra funding when it’s needed most, but only when done so with caution and consideration for how it will impact your company’s balance sheet in the future. When used prudently, these loans can give your business some added flexibility while maintaining the leverage of knowing that you have a steady stream of income to pay back what you owe.
Frequently Asked Questions About Acquiring Multiple SBA Loans
What is the average size of an SBA loan?
Most banks will cap their requests at $650,000 depending on how much money your company’s revenue and current debt ratio. If you’re looking for additional funding, get in touch with a lender who’s worked with businesses like yours for expert advice.
How many SBA loans does the average business get?
Most small business owners will only apply for one SBA loan throughout their entire lifespan while others won’t apply at all. Only around 7% of SBA-backed loans are used to acquire more properties or buy equipment, while most of them are used for working capital purposes.
Can you have multiple business loans at once?
It depends on your situation. While you can technically have more than one business loan at any given time, it’s possible that you may not be approved right away if your company has had issues making timely payments in the past or if it has too many outstanding debts. If this is the case, then it may be a good idea to take a step back and think about what your business needs in order to grow before you submit another application.
Multiple SBA loans may not always be ideal for every business owner since they expose you to more risks than you may want or need. Make sure that you’re aware of how taking out a second loan will affect your personal and business’ financial records over time, and always ask for help from a financial expert to ensure you’re on the right path.
Finally, when applying for more than one SBA loan, keep in mind that there is a limit to the total amount that can be borrowed. The federal government will back up to $3.75 million in total, no matter the number of SBA loans you take out.
Considering Alternative Business Loans? LendThrive Can Help
SBA loans are great, but acquiring one — let alone multiple — isn’t an easy task. The typical small business loan approval rate, including SBA loans, is 13.6% at big banks and 18.9% at smaller banks. Not to mention this process can take months, whether you’re approved or denied. This can be alarming, especially if you are in the process of gathering your paperwork or need funding quickly. Luckily, there are private lenders who specialize in fixed rate business loans, like LendThrive.
LendThrive is a lending provider that helps small business owners secure as much as $150,000, minus the usual stress of qualifying for a loan. We’re able to do so thanks to our streamlined application process, which is fast, easy, and hassle-free.
It takes only 15 minutes to apply. Apply for a loan with LendThrive today to immediately get the funds your business needs.
