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NGExpert financial copywriter
For small businesses looking for working capital loans, the U.S. Small Business Administration (SBA) Community Advantage Loan may be a good option.
The loan program offers up to $350,000 for small businesses that qualify, including new businesses. Read on to find out more about the SBA Community Advantage loan program, including qualifications and how to apply.
Page written by Kat Cox. Last reviewed on August 12, 2024. Next review due October 1, 2025.
The SBA Community Advantage (CA) loan program is part of the SBA 7(a) loan program. It’s meant specifically to help small businesses that may not have access to traditional loans and may not have been able to meet the requirements to get a bank loan. This includes new businesses and startups, companies owned by veterans and businesses started in low-income areas. Because the loans are made for underserved communities, they tend to have more flexible requirements than other business loan programs.
As with most SBA loans, SBA CA loans are guaranteed by the SBA but are managed by other lenders. In the case of Community Advantage loans, mission-based lenders (usually non profits) manage the approval and funding of the loans. They also set the rates and terms, which are generally very competitive.
SBA CA loans can include lines of credit, as well as loans for:
As a pilot loan program, the SBA Community Advantage loan program is set to expire September 30, 2024.
The largest loan you can get from the SBA Community Advantage loan program is $350,000. The SBA will guarantee up to 85% of the loan amount up to $150,000, 57% for loans greater than $150,000 and 90$ for International Trade Loans.
In terms of interest rates, they are set by each lender. However, the SBA sets maximum interest rates which are tied to the Wall Street Journal Prime rate plus a percentage based on how much you borrow:
The repayment terms for each loan will depend on what you use the money for. If you get a working capital loan or purchase equipment or inventory, the repayment term can be up to 10 years. For real estate loans, the repayment term can be up to 25 years. Lines of credit can have a repayment term of 10 years or fewer, inclusive of a term-out period.
There are fees associated with SBA Community Advantage loans. The one-time guarantee fee is adjusted every fiscal year and varies based on how much money you borrow. Each lender can charge a fee but they may not exceed maximums set by the SBA. In 2023, the CA program did not charge a guarantee fee for the fiscal year.
Lenders in the SBA Community Advantage program can be any of the following:
Every lender will have their own requirements for qualifying businesses to get a loan. However, the SBA has set some general requirements that you can expect to meet.
The SBA has general qualifications that small businesses must meet in order to get an SBA loan. These include that your business must:
Because the Community Advantage program is meant for underserved communities, they tend to have somewhat less strict requirements for getting a loan. You can expect to need:
How you apply for an SBA Community Advantage loan will vary depending on which lender you decide to borrow from. Still there are some standard steps you can expect to need to follow.
In order to apply for an SBA Community Advantage loan, you’ll first need to find the right lender for you. It’s a good idea to do research into which lenders in your area have the best interest rates and terms for your business. The SBA keeps a list of their approved lenders which you can search by location and by their approval rate.
After you’ve selected your lender, you should gather specific business documents, including:
In addition, there are several SBA forms that most CA lenders will require, including:
You may want to prequalify for the loan with your lender by submitting your basic financials before you submit the full application.
Once you’ve submitted all of your documents and the application, the lender will review everything and determine whether or not you’re approved.
Once the lender has received all of your application materials and documents, it can take anywhere from two weeks to four weeks for the approval to go through. It’s important to make sure you submit all of the required documents at once so you don’t have any delays.
The best loan for your business is the one that you qualify for. The SBA Community Advantage loan program is particularly good for new businesses and those that may have trouble securing traditional financing or loans. But there are a few other questions you may ask yourself before you apply:
If you don’t feel the SBA Community Advantage program is right for you, there are many other SBA loan options you can consider to finance your small business.
If you need more money than the Community Advantage program loans offer, the SBA 7(a) program may be a better option for you. They have similar requirements, but lend up to $5 million for similar purposes, like working capital, purchasing equipment or even refinancing business debt.
Another SBA program that you may consider is the SBA 504/CDC program, which is meant for projects that will increase jobs and/or have a community focus. This includes buying or improving commercial real estate, major equipment purchases and more.
If you don’t have sound financials or a good credit score, you may qualify for a business credit card. This can help fund daily expenses for your business, including equipment, bills and more. It’s important to be sure you can pay off credit card debt relatively quickly, because interest rates can get steep. But if the credit card reports to the credit bureaus, you may be able to build your personal credit by making minimum monthly payments.
Find the right financing for your small business with Swoop. Simply download our app and answer a few questions to find the right funding for your business today. We compare information from over 1,000 lenders and financial institutions to match you with the right one. And we’re also available to help you every step of the way, from finding the right loan to applying.
Written by
As a B2B finance content specialist, Kat Cox's goal is to distill complicated financial issues into useful information for small business owners, to save them time they could be using to build their companies. Her work has been featured in Forbes and on financial health platform Nav.com. When she's not writing blogs, web copy, or fiction, Kat can be found walking her dog or singing karaoke in Austin, Texas.
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