Depending on whether your lender will process, you can take out multiple SBA loans at the same time. There are certain things that are taken into consideration, however, such as the total amount borrowed which cannot go over the limit of the SBA loan program.
It also depends on what kind of SBA program you go for and numerous loans can be taken out from the SBA 7(a) loan program, microloan program and 504 loan program. There are certain loans where you cannot take out more than one such as Economic Injury Disaster Loans (known as EIDLs) which are applied for damages of a single declared disaster.
Qualifying for more than one SBA loan means that you need to make sure that you are paying your other loans back on time as well as having a strong credit score, sufficient collateral and positive cash flow. In this guide, we’ll be delving into how taking out multiple SBA loans work and what you need to consider before making that decision.
How many SBA loans can you have?
Before applying for another loan, the first thing you’ll need to learn is how many SBA loans you can take out. The majority of common SBA loan programs are not limited to that singular loan. It is actually possible to take out two or three loans at the same time provided you meet the lender’s criteria.
If you are wanting to take out an additional loan, you’ll have to fulfil the following requirements:
- The loan has to meet the eligibility requirements of both SBA and the lender you are taking the loan from.
- The money that is taken out for the second loan cannot be used to pay back another existing SBA loan unless you are in exceptionally rare circumstances.
- Your first SBA loan has to be in good standing with regular payments made on time.
- You must have a good credit score that is a minimum of 690.
- You have to provide proof of positive cash flow.
- The total amount of your SBA loans cannot exceed the total loan program’s borrowing amounts.
- If you are taking out a lot of money, you’ll have to put sufficient collateral forward.
- A personal guarantee has to be signed on each loan.
What are the borrowing limits for taking out multiple SBA loans?
Having mentioned previously that there are total limits depending on what SBA loan program you borrow from, it’s important to know what those maximum limits are. This means that you aren’t exceeding the total amount that you can borrow as well as allowing you to create an appropriate business plan and budget so you know that you can pay off the loans.
Here are the maximum limits that you need to keep in mind when deciding how much you want to borrow:
SBA 504 Loan Program
- Maximum amount: $5.5 million
SBA 7(a) Loan Program
- Maximum amount: $5 million
SBA Express Loan Program
- Maximum amount: $500,000
SBA Community Advantage Loan Program
- Maximum amount: $250,000
SBA Microloan Program
- Maximum amount: $50,000
Even if you are borrowing money from different lenders, when you apply for an SBA loan, you still have to keep it below the maximum amount. Therefore, it isn’t possible to exceed that total maximum amount even if you have loans from numerous lenders. This is because SBA will have your collected information and this will be passed on to the lenders.
You’re also not guaranteed to be able to take out another loan as some lenders may want to mitigate risk. There are also instances where you need to pay off a certain amount of your first loan as well as waiting a few months after taking out one loan before being able to apply for another.
How to Apply for More than One SBA Funds
You may decide that taking out a second SBA loan is the answer to your business’ current funding needs. Before completing your application, you need to consider certain factors so you can provide proof that you are able to pay back the loan on time as well as allowing you to determine how much you need to borrow.
Not only do you have to go through the same application process as your first loan but you also have to assure your lenders that this loan is a necessity to your business and won’t affect your ability to pay back both loans. Here are the steps you should follow before completing the application process:
Calculating Your Cash Flow
This first step shouldn’t be a surprise as you always need to inform your lenders of your business’ current income as well as projections to see how this loan will affect your profit margins.
Calculating your cash flows will also mean that you can show your lenders that you are capable of paying back both loans on time. Lenders will have a look through various documents such as tax returns and financial statements as well as calculating your total debt service coverage ratio which is known as DSCR.
Checking Your Credit Score
Following on from calculating your cash flow, always check your credit score. If your first SBA loan has caused your credit score to decline then you may find that qualifying for a second SBA loan is a bit more difficult.
On average, lenders like to see a credit score of 690 or higher meaning that you have a good credit score. On the other hand, if you have a lower credit score but your cash flow is excellent and you have sufficient collateral then certain lenders may accept your application.
Considering Sufficient Collateral
Another important factor that you need to think about is considering what collateral you wish to put forward. This is because extra loans equate to greater risk meaning that you have to put forward sufficient collateral that can cover any unpaid costs should your loan become impossible to pay off.
This can take the form of business assets, real estate or life insurance policies among much more. When you take on more debt, you need to put forward more collateral to ensure lenders that they are covered in order to secure the loan.