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What are SBA Community Advantage Loans?
If you’re a minority business owner, or a member of another underserved community, it can be especially challenging to get financing for your small business. Fortunately, the Small Business Administration is committed to providing small business loans to underserved populations through its Communi
If you’re a minority business owner, or a member of another underserved community, it can be especially challenging to get financing for your small business. Fortunately, the Small Business Administration is committed to providing small business loans to underserved populations through its Community Advantage program. SBA Community Advantage loans are a form of financing offered in amounts between $50,000 and $250,000. Like other kinds of SBA loans, SBA Community Advantage loans are guaranteed by U.S. government, however, these loans are typically offered by non-profit community based lenders, instead of private lenders and banks.
What are the Benefits of SBA Community Advantage Loans?
SBA Community Advantage have benefits including:
Lower credit score requirements than other types of SBA financing
Loan terms of between 7-10 years
Reasonable interest rates
May be easier for minorities and other underserved populations to get financing
Community Development Financial Institutions: These are organizations that are specifically designed to assist underserved markets and populations. CDFIs are private organizations that can turn a profit, but they are generally designed to prioritize the community instead of benefiting shareholders.
SBA-authorized Microloan Intermediaries: Microloan intermediaries, also known as micro-lenders, are non-profit organizations that receive loan funds directly from the SBA, and then distribute these funds to borrowers. In many circumstances, microloan intermediaries also provide technical assistance to borrowers.
Certified Development Companies: Certified Development Companies, also known as CDCs, are non-profit organizations that are licensed by the SBA to help provide funding to businesses that ordinarily would not be able to get it. CDCs are best known for working with private lenders to help administer SBA 504 loans.
For-profit, as the SBA does not help fund non-profit entities
A ‘small business,’ as defined by the SBA (typically no more than 500 employees and assets of no more than $15 million)
In an SBA-eligible industry (i.e. no real estate development, adult entertainment, speculation, or gambling businesses allowed)
Be in possession of a good, but not great, credit score; some lenders, like Accion, will approve borrowers with scores as low as 575
Have relevant experience in the industry in which their businesses is in
Have a solid business plan, often consisting of at least 2 years’ worth of reasonable sales/profit projections
What are the eligibility requirements for SBA Community Advantage Loans?
In order to be eligible for a Community Advantage loan, a business must be:
- For-profit, as the SBA does not help fund non-profit entities
- A ‘small business,’ as defined by the SBA (typically no more than 500 employees and assets of no more than $15 million)
- In an SBA-eligible industry (i.e. no real estate development, adult entertainment, speculation, or gambling businesses allowed)
Plus, borrowers must:
- Be in possession of a good, but not great, credit score; some lenders, like Accion, will approve borrowers with scores as low as 575
- Have relevant experience in the industry in which their businesses is in
- Have a solid business plan, often consisting of at least 2 years’ worth of reasonable sales/profit projections
What are the benefits of SBA Community Advantage Loans?
SBA Community Advantage have benefits including:
- Lower credit score requirements than other types of SBA financing
- Loan terms of between 7-10 years
- Reasonable interest rates
- May be easier for minorities and other underserved populations to get financing
What types of businesses are eligible for SBA Community Advantage Loans?
In order to be eligible for a Community Advantage loan, a business must be:
- For-profit, as the SBA does not help fund non-profit entities
- A ‘small business,’ as defined by the SBA (typically no more than 500 employees and assets of no more than $15 million)
- In an SBA-eligible industry (i.e. no real estate development, adult entertainment, speculation, or gambling businesses allowed)
Plus, borrowers must:
- Be in possession of a good, but not great, credit score; some lenders, like Accion, will approve borrowers with scores as low as 575
- Have relevant experience in the industry in which their businesses is in
- Have a solid business plan, often consisting of at least 2 years’ worth of reasonable sales/profit projections
How do I apply for an SBA Community Advantage Loan?
You can apply for an SBA Community Advantage Loan through an approved lender. You can find a list of approved lenders here. You will need to provide the lender with your business plan, credit score, and other relevant information. The lender will then review your application and, if approved, submit it to the SBA for final approval. It can take up to 30 days for the loan to close after lender approval.
What are the maximum loan amounts for SBA Community Advantage Loans?
SBA Community Advantage Loans are available in amounts between $50,000 and $250,000. Source
Who Offers SBA Community Advantage Loans?
Community Advantage loans can be provided by organizations including:
Is My Business Eligible for an SBA Community Advantage Loan?
In order to be eligible for a Community Advantage loan, a business must be:
Plus, borrowers must:
What Else Should I Know About SBA Community Advantage Loans?
Community Advantage loans can be a fantastic way to get funding for a small business, however, it’s important to realize that it may take slightly longer to get funding through this program than with other types of microloans (like SBA microloans). It can often take around 30 days after lender approval for the loan to actually close, due to the need for additional SBA approval. And, unlike some other kinds of SBA loans, Community Advantage loans can be a great option for startups. However, just as with other kinds of financing, startups will face a slightly tougher approval process, since they may not have much in income to show potential lenders.