A Merchant Cash Advance (MCA) is a type of business financing that provides a lump sum of cash in exchange for a predetermined percentage of a business’s future sales. It is typically used by small businesses that have difficulty qualifying for traditional bank loans. Businesses that need quick access to capital and can’t wait for a bank loan may find an MCA to be a useful option.

Whether you’re gearing up to expand your physical location, purchasing crucial equipment, or hiring new talent, the now team has over a decade of expertise working with business owners in a range of industries, equipping them with the capital they need to take the next step toward growth.

If you’ve been researching your business’s financing options, you’ve likely come across SBA (Small Business Administration) loans, and you may be wondering whether this type of loan is right for you.

As industry-leading experts, we know that there is no “one size fits all” approach to business loans. Keep on reading to find out everything you need to know about SBA-backed loans, including what they are, their benefits, and how you could be approved for business funding within three hours with now fund.

Looking for personalized advice on accessing business credit? Get in touch with us today or download the [Name] app to take your business to the next level of success with now fund.


What is an SBA Loan?
An SBA (Small Business Administration) loan is a type of small business loan issued by a private lender but backed by the federal government. The program was initially introduced in 1953 to aid Americans in launching and growing their businesses.

When you apply for an SBA loan, you do not apply directly to the SBA itself. Rather, you will apply through an SBA-approved lender like the now fund.

Business owners can use SBA-backed loans for various essential line items that will form the foundation of their small businesses. For example, for companies in the construction sector, an SBA 7(a) loan can be used for equipment purchases and physical expansion as you carve out a niche for yourself as a market leader. For those in agriculture, a Seasonal CAPLine can help you manage increased labor costs during your busy season. No matter what industry you’re in, it’s likely that there is an SBA loan program suited to your needs.

Because the federal government backs SBA loans, lenders can offer SBA loans at more favorable rates and with less stringent lending criteria than conventional business loans. This, coupled with the now fund team’s extensive network of banking industry relationships, positions us to get you the best type of loan for your business—faster and at a better rate. Contact us today to find out how!


The Differences Between an SBA Loan and Conventional Business Loan
While both SBA loans and conventional business loans are generally issued by banks, SBA loans are only offered by banks that participate in the SBA loan guarantee program. This gives the bank added protection because the SBA will buy back a portion of your loan from the lender if your business defaults on the SBA loan payment.

Accessing a conventional business loan may be challenging for small businesses because the application criteria are more stringent than with SBA loans. This is due to the fact that with a conventional business loan, the lender takes on the entire risk of nonpayment of a loan.

Some of the eligibility requirements for a conventional business loan may include the following:

The business has been operational for at least two years
The business meets a minimum annual revenue, usually between $100,000 to $250,000
The business has a strong credit history
The industry risk profile

If your small business is new, does not meet the lender’s minimum annual revenue requirements, or does not have a strong credit history, you may find that you cannot access a conventional business loan. This is where an SBA loan comes in.

Because of the decreased risk to the lender, banks can often offer more favorable terms when lending through an SBA loan. Some of the ways these terms may benefit applicants include:

They are more accessible for small businesses
They have more flexible underwriting criteria
They may offer longer repayment terms
The interest rates are subject to SBA maximums

Before deciding whether to apply for an SBA or a conventional business loan, speak to the now team to thoroughly explore both options while keeping in mind your business’s financial health, age, and credit history.


What are the Most Common Types of SBA Loans?
While an SBA loan may sound like a single type of small business loan, it is actually an umbrella term for various types of SBA loans. Each type has its own terms, conditions, and eligibility criteria.

Generally, when you read about SBA loans, it is most likely in reference to the SBA 7(a) loan program. This is the most popular SBA loan program. Its name is taken from section 7(a) of the Small Business Act, which allows the federal government to provide loan guarantees to participating SBA lenders.

Here are the types of loans offered within the SBA 7(a) loan program:
Standard SBA 7(a) Loan
7(a) Small Loan
SBA Express Loan
Export Express Loan
Export Working Capital
International Trade
CAPLines

SBA 7(a) loans can be used for various purposes, including expanding your physical property, purchasing equipment, repairing capital, and refinancing current debt.

Not sure which SBA 7(a) loan is best for your business? Get in touch with our expert team for market-leading advice.


Standard SBA 7(a) Loan

There is no minimum loan amount for a Standard SBA 7(a) loan, and the maximum loan amount is $5 million.

Although there is no minimum amount, if you plan to apply for a loan of less than $500,000, you may want to consider an SBA Express Loan. If you plan to apply for a loan of $350,000 or less, consider applying for an SBA 7(a) Small Loan.

If you plan to apply for over $5 million, the SBA 504 may better suit your needs.

Standard SBA 7(a) Turnaround Time

You can expect to have a decision on your Standard SBA 7(a) loan within 5 - 10 business days.

Standard SBA 7(a) Loan Collateral
Because a standard SBA 7(a) loan is generally taken out for loans of $350,000 and more, the lender will be required to collateralize their loan to ensure that they have a secondary source of repayment if the borrower defaults on their SBA loan payment.

Collateral can take the form of:

Commercial real estate
A second mortgage on the business owner’s home
Machinery or equipment
Accounts receivable


7(a) Small Loan
The maximum amount that can be borrowed with the 7(a) Small Loan is $350,000. If you want to borrow $50,000 or less, you may want to apply for an SBA Microloan instead.

7(a) Small Loan Turnaround Time
You can expect to have a decision on your 7(a) Small Loan within 5 - 10 business days.

7(a) Small Loan Collateral
If your SBA 7(a) loan is $25,000 or less, lenders are not required to take collateral for your loan, although this will vary from one lender to another. However, if your loan is $25,000 or more, the SBA requires your lender to collateralize the loan according to their established collateral policies and procedures.


SBA Express Loan
As mentioned above, SBA Express loans are a good option for those who need to borrow $500,000 or less. In addition, this loan program features an accelerated turnaround time so businesses can get approval from the SBA much faster than with a Standard SBA 7(a) Loan or 7(a) Small Loan.

SBA Express Loan Turnaround Time
You can expect to have a decision on your SBA Express Loan within 36 hours.

SBA Express Loan Collateral
Lenders are not required to take collateral if the loan amount does not exceed $25,000. For loans that are $25,000 and above, the lender is required to follow their established collateral policies and procedures.


Export Express Loan
Unlike the SBA Express Loan, the Export Express Loan is only available to exporters who need capital to support their international export development activities.

Any export development activities that support growth are eligible. Some of these activities include:

Participating in a trade show outside of the U.S
A line of credit for export purposes
Performing services for buyers outside of the U.S
Purchasing real estate or equipment to be used for the production of goods for export

The Export Express Loan offers a streamlined process where lenders can use their own credit decision process to approve a loan of up to $500,000. The lender will then receive a response from the SBA within 24 hours.

Export Express Loan Turnaround Time
Because this type of loan does not require pre-approval from the SBA, you can expect a decision on your loan within 35 hours.

Export Express Loan Collateral
The lender is required to follow their established collateral policies and procedures.


Export Working Capital
Export Working Capital loans offer up to $5 million in funding. They are tailored to businesses that have the opportunity to generate export sales but need working capital in support of these sales.

Because business owners can apply for the loan before finalizing a sale, they have more flexibility in negotiating export payment terms.
Export Working Capital Turnaround Time

You can expect to have a decision on your Export Working Capital loan within 5 - 10 business days.

Export Working Capital Collateral

Owners with 20% or more ownership in the business will be required to offer a personal guarantee in the form of personal assets. In addition, export-related inventory and the receivable generated by export sales financed by Export Working Capital funds will be collateralized.


International Trade Loan

The International Trade SBA loan offers long-term financing of up to $5 million to businesses currently engaged in or preparing to engage in international trade. Businesses that have been negatively impacted by foreign competition are also eligible for the loan.

The International Trade SBA loan can be used for the following:

Fixed assets for construction
Real estate development
Working capital for export transactions

If you’re unsure whether your business qualifies for an International Trade Loan, get in touch with the now team or download the [Name] app to learn more.
International Trade Loan Turnaround Time

You can expect to have a decision on your International Trade loan within 5 - 10 business days.

International Trade Loan Collateral
The SBA offers a 90% guarantee on International Trade loans up to $4.5 million, and U.S-based equipment, property, or business assets may be collateralized.


CAPLines
Short-term and cyclical needs can send costs skyrocketing for businesses. To meet their unique needs, the SBA CAPLines program offers four lines of credit up to $5 million that business owners can access.

The four types of CAPLines programs are:
Seasonal CAPLine
The proceeds can only finance the seasonal increases in accounts receivable, inventory, or labor costs.

Contract CAPLine
The funding can only be used to fund direct labor and material costs associated with carrying out assignable contracts.

Builders CAPLine
This finances direct labor and material costs for a general contractor or builder who is constructing or renovating commercial or residential property.

Working CAPLine
This funding is used for short-term working capital and operational needs in order to cover ongoing business expenses.

To find out which SBA CAPLines program is best suited to your business, chat to the now team.
CAPLines Turnaround Time

You can expect to have a decision on your CAPLines line of credit within 5 - 10 business days.

CAPLines Collateral
Business owners who hold 20% or more ownership of the business will be required to guarantee the loan.


Other Types of SBA Loans
While 7(a) loans are the most popular type of SBA loan, other SBA loan programs may be better suited to your business depending on your business’s size, age, and objectives. Navigating SBA loans can become complex, so get in touch with our team for expert advice on choosing the right one for your business.

Some of the other types of SBA loan programs include:

CDC/504 Loans
An SBA 504 loan provides long-term, fixed-rate financing up to $5 million to purchase fixed assets (such as real estate). For approved energy projects, borrowers can access up to $5.5 million per project for up to three projects, at a maximum of $16.5 million.

For a business to be eligible for an SBA 504 loan, it must meet the following eligibility requirements:

Operate as a for-profit business within the U.S
Have a tangible net worth under $15 million
Have an average net income of $5 million after taxes for two years prior to your SBA application

SBA Microloans
SBA microloans of up to $50,000 are available to small businesses and approved not-for-profit childcare centers to help them launch or grow. Unlike other SBA loans, these microloans are provided by intermediary lenders who manage the lending and credit requirements.

An SBA microloan can be used for a variety of purposes, including:
Working capital
Equipment
Inventory

A microloan cannot be used to pay off existing debts.

SBA Disaster Loan
If your business or private nonprofit organization is affected by a declared disaster, your business can access up to $2 million in credit from the SBA Disaster Loan program. These funds can be used to repair or replace damaged property or equipment.

Unlike other SBA loans, borrowers will apply for an SBA Disaster Loan directly through the Disaster Loan Assistance program.


Am I Eligible for an SBA Loan?
As we’ve outlined, there are various SBA loan programs, each with unique eligibility requirements and terms. These programs are:

Standard SBA 7(a) Loan
7(a) Small Loan
SBA Express Loan
Export Express Loan
Export Working Capital
International Trade
CAPLines
CDC/504 Loans
Microloans
Disaster Loan

The age of your business, your industry, and your funding requirements will dictate what type of SBA loan you may be eligible for. If you’re unsure what type of SBA loan program your business may qualify for, get in touch with the now team for expert advice, or download our app.

In general, businesses must meet the following criteria to qualify for an MCA loan:

The business must operate for profit
The business must currently operate in (or propose to operate in) U.S territories
The owner must have reasonable equity to invest
The business has sought alternative financing before applying for an SBA loan

While most businesses and industries will be eligible for an SBA 7(a) loan, some businesses are ineligible, even if they meet all other criteria. According to the
U.S Small Business Administration, ineligible business activities include:

Illegal business activities
Lending activities
Gambling
Multi-sales distribution
Dealing stamps and rare coins
Charitable or religious organizations


The Pros and Cons of SBA Loans
While SBA loans offer business owners several advantages, the only way to determine whether they’re suitable for your business is to carefully weigh the benefits and drawbacks with the guidance of the now fund team of financial professionals. These are some of the pros and cons of SBA loans:

Pros of SBA Loans
Businesses that cannot access funding through conventional business loans may be eligible for SBA loans.
The interest rate on SBA loans is capped at Prime + 6.5 for SBA Express and Export Express of $50,000 or less. For SBA loans over $50,000, the interest rate is capped at Prime + 4.5
SBA loans offer flexible borrowing amounts ranging from $50,000 to $5 million.
The SBA program is intended to help small business owners access long-term loans, so the loan repayment terms tend to be longer than conventional business loans

Cons of MCA Loans
A strong business credit history is usually required to gain approval for an MCA loan.
Physical collateral may sometimes be required to access funding.
If physical assets cannot be collateralized, the business owner may be held personally liable for the company’s debt


Looking for an MCA Loan? You Can Get Funded Today, Not Tomorrow!
At now fund, we’ve been honing our expertise and building our network within the banking industry for over 12 years. Then, in 2021, we decided to go our own way to do better banking that embodies the ethics we believe in while empowering small American businesses with the funding they need to reach the next level of success.

We are proud to have enabled clients in a wide variety of industries (including accommodation and food services, arts and recreation, waste management, construction, and manufacturing) to access business credit at favorable rates. The now team is passionate about providing unmatched customer service, and we go to great lengths to help our clients access the funding they need at market-leading prices. Drawing on our extensive network of banking industry relationships, we can customize unique loans that other institutions can’t.

In championing our commitment to seamless digital service, we created the [Name] app to make the application process more accessible than ever. Simply answer a few questions, and we’ll be able to quickly and accurately evaluate your business to help you secure a loan—no time spent giving information over the phone is required!

Whether you’re navigating MCA loans or think a small business loan or cash advance might be better suited to your needs, our highly-skilled experts are ready to help match small business owners to financing that gives them the backing to pursue their most ambitious goals.

Are you ready to secure your business’s future success today? Get in touch with the now team or to supercharge your growth journey.