Opinion: New SBA changes could be a boon for small businesses

Travis Beazley

If you haven’t considered a Small Business Association loan for your startup or growing business in a while, now could be a good time to look again. The U.S. Small Business Administration recently made two announcements that could have a significant impact on access to capital for local small businesses.

In a small but mighty adjustment, the SBA has raised the bar for what it considers a small loan. Instead of $350,000, the new small loan limit is now $500,000. This loan limit increase aims to encourage lending activity to smaller businesses, thus expanding access to critical funding.

The SBA also announced that for the second consecutive year, it will not charge upfront fees for loans of $1 million or less for both 7(a) and 504 loans for its fiscal year 2025, which starts Oct. 1. This waiver can save borrowers significant amounts, as the usual upfront fees range from 2% to 3.5% of the guaranteed portion of the loan.

Implications for startups
For aspiring entrepreneurs, these changes are particularly encouraging. SBA loans are often lifelines for startups, offering favorable terms that might not be available through traditional lending. Here’s a closer look at key SBA loan programs beneficial for startups:

1. 7(a) Loan Program: The most common SBA loan provides up to $5 million for a wide range of uses, including working capital, expansion and equipment purchases. With competitive terms and interest rates, it’s an attractive option for new businesses needing flexible funding.
2. 504 Loan Program: Designed for significant fixed-asset projects, this loan offers long-term, fixed-rate financing of up to $5.5 million. It’s ideal for startups needing to purchase large equipment or real estate.
3. Microloan Program: This program provides loans up to $50,000 to small businesses and certain nonprofit child care centers. It’s particularly beneficial for very small startups needing initial funding for supplies, equipment or working capital.
4. SBA Express Loans: With a quicker approval process, these loans offer up to $500,000 and can be structured as revolving lines of credit, making them suitable for startups needing fast access to funds or open-end credit that’s available when it’s needed.

Broader impact on business growth
The broader impact on business growth extends beyond immediate financial support. Access to larger loan amounts and fee waivers can lead to long-term sustainability for local small businesses. With increased capital, businesses can focus on strategic growth initiatives to help them expand and compete. This sustained growth can lead to more robust local economies, job creation and innovation across our community.

By enabling more businesses to qualify for SBA loans, the SBA is fostering a more competitive business environment. Companies that might have struggled to secure funding through traditional lending channels can now benefit from SBA’s favorable loan terms. This increased access to capital helps level the playing field, allowing smaller businesses to compete with larger firms.

Navigating SBA loans
Securing an SBA loan involves understanding the eligibility criteria and preparing a robust business plan. The SBA provides numerous resources to assist in this process, including local Small Business Development Centers, SCORE mentoring and the SBA’s online learning platform. These resources are invaluable for startups and growing businesses seeking to navigate the complexities of SBA loan applications.

These changes by the SBA mark a significant step toward fostering a more inclusive and supportive environment for small businesses. By accommodating more businesses under its programs, the SBA is enhancing opportunities for startups and existing businesses alike to access vital funding. For entrepreneurs, this is a prime moment to leverage SBA resources, secure necessary capital and drive their businesses towards sustainable growth and success.

For more information on these updates and SBA loan programs, you can visit SBA.gov.

Travis Beazley is a senior vice president and loan officer specializing in SBA lending for OMB Bank in Springfield. He can be reached at t.beazley@ombbank.com.