The Ultimate Guide To SBA Community Advantage Loans

All applicants for an SBA Community Advantage loan must meet the standard eligibility requirements set forth by the SBA. All applicants must:

• Own a for-profit business
• Engage in or plan to engage in business in the United States
• Be a small business as defined by the SBA
• Demonstrate a need for funding
• Exhausted all other financing options
• Prove that they can repay the loan
• Meet credit score requirements

Businesses must also be in an eligible industry. Ineligible industries include:

• Businesses engaged in illegal operations
• Lending
• Investing
• Multi-level sales

Before applying for a loan, check your credit score. A good credit score is a requirement for all SBA loans, including the Community Advantage program. A minimum score of 680 is recommended for the highest chance of approval. Any negative marks on a credit report will need to be explained to the lender.

The SBA has requirements specific to the Community Advantage program. In order to qualify for a loan, the applicant must operate the business in an underserved market. This includes:

• Low-to-Moderate Income communities
• Businesses where over 50% of full-time staff is low-income
• Empowerment Zones
• Enterprise Communities
• Promise Zones
• HUBZones

In addition to the underserved communities previously listed, startups that have been in business for fewer than two years are also eligible to apply. Servicemembers and military veterans who qualify for the SBA Veterans Advantage program and meet all other requirements can also apply for a Community Advantage loan.

To begin, you will need to find a lender that offers SBA Community Advantage loans. You can use the SBA’s Lender Match service to find a local lender in your area, or you can ask your existing financial institution for a list of SBA Community Advantage lenders.

Once you’ve found a lender, you’ll need to work with them online, over the phone, or in-person to complete the application process. Your lender will guide you through the process and will provide the details specific to your loan, such as interest rates, terms, and collateral requirements.

The lender will also require personal information from you relating to your credit, finances, and business history. You can get started ahead of time by gathering a few critical documents, including:

• Business licenses and permits
• Financial statements
• Personal federal income tax returns
• Business tax returns
• Business credit reports

For startup ventures that have been in operation for fewer than two years, you may be required to provide:

• Proof of industry experience
• Business plan
• Financial projections for at least 12 months

Other documentation may be required for both established and startup businesses.

You will work with your lender to complete your loan application. You will need to provide personal and business information, as well as:

• The amount of the loan requested
• The purpose of the loan

The lender will run your credit and will check your credit report. Any negative items, such as late or missed payments, will need to be explained to the lender. Other negative items, such as bankruptcies and foreclosures, may prevent you from qualifying.

Once all documentation has been submitted and the lender approves your application, all items will be sent to the SBA for approval and funding.

Once the application is completed, approval and funding typically take several months because of the lengthy underwriting and closing processes. The entire process from application to funding takes an average of 30 to 90 days (and sometimes longer).

If you need approval in a hurry, consider applying for the SBA Express loan.

After the application is approved and the underwriting and closing process is complete, funds will be distributed, and you can use them to purchase, update, or expand your small business.

Community Advantage loans are like other SBA loans and must be repaid. No forgiveness options are available for this loan program.

While credit score requirements vary by lender, credit scores should be at least 680 for the best chances of qualifying for a Community Advantage loan.

Applying for any type of SBA loan, including the Community Advantage loan, can be a long and difficult process. Additionally, applicants must meet all requirements of the SBA and the lender to qualify. However, eligible business owners will find it’s worth the effort to receive a competitive, long-term loan.