Small Business Administration (SBA) Loan Program

The SBA Community Advantage Loan Program is a Community Advantage loan that helps small businesses acquire loans from traditional sources, including banks. It provides funding options to help with specific needs, such as leasing equipment or refinancing existing debt. The program also enables banks to take advantage of the Government’s guarantee while still maintaining control over their own credit decisions.

What Is the Goal of the Community Advantage Loan Program?

The goal of the Community Advantage Loan Program is to provide small businesses with access to credit that they may not otherwise have. The program allows banks to offer loans to businesses that may not meet the stringent requirements set by traditional lenders. This opens up more opportunities for small businesses to grow and create jobs.

Who Qualifies for the Community Advantage Loan Program?

In order to qualify for the Community Advantage Loan Program, an applicant must meet the following requirements. Take note, however, that completing these requirements still doesn’t guarantee approval from SBA.

For-Profit Business

Applicants must be for-profit entities that have been in business for at least two years. Nonprofit businesses and government agencies are not eligible to participate in the Community Advantage Loan Program.

Business Should Be Conducted in the United States

The business must be located in the United States and conduct business within the country.

Should Be a Small Business

In order to qualify as a small business, it should be comprised of less than 500 employees and should have assets less than $15 million.

Borrowers Must Be Credit-Worthy

In order to qualify for a Community Advantage Loan, businesses must meet the credit standards of the bank issuing the loan. In most cases, this means that businesses must have a credit score of at least 640 or higher.

Business Should Not Be Involved in Certain Industries Specified by SBA

The following activities will disqualify applicants from receiving a Community Advantage Loan:

  • Engaged in adult entertainment
  • Engaged in political activities

Requirements When Applying for Community Advantage Loan Program

Applicants can apply for community advantage loans through various channels. Some banks offer this service on their own website while others work exclusively with SBA. In some cases, borrowers who have been approved for other SBA-backed loans are automatically eligible to participate in the Community Advantage Loan Program as well. Below are the requirements that applicants need to comply with to apply for the loan:

Credit Score of Business

Although the community advantage loan program is mission-based, it is still stringent in terms of credit. Typically, your business must have a credit score of 640 or better to qualify for this loan.

Statement of Revenue and Profits

In order to verify your company’s financial history, you will need to submit a statement of revenue and profits. This should include a complete list of all sales for the past three years as well as a current profit-and-loss projection.

Proof of Legal Entity

When applying for the loan, you’ll need to provide evidence that your company is a legal entity. This can be done by providing articles of incorporation, partnership agreement, or any other similar document.

Record of Debts and Payment History

To assess your company’s creditworthiness, lenders will want to see a record of debts and payment history. This should include information on all outstanding loans and lines of credit as well as how often you’ve made payments on time.

Business Vision and Growth Plan

To assess your company’s long-term viability, lenders will want to see a business vision and growth plan. This should outline how you plan to grow your business in the future and achieve profitability.

Cash Flow Projections

As part of your business growth plan, you’ll need to provide detailed cash flow projections. This should include monthly statements for the next two years as well as a breakdown of all expenses and revenue.

Final Thoughts

The Community Advantage Loan Program is a great way for small businesses to get access to much-needed credit. The program has fewer requirements than traditional loans, making it easier for businesses to qualify. Take advantage of this program if you’re looking for financing to expand your business.

The interest rates for these loans are often determined by market factors rather than set by SBA. In most cases, the interest rate is set between 8 to 11 percent.
Each bank that offers this type of loan has its own process and timeline for approving applications. In general, it usually takes one to two weeks to get approval or denial following filling out an application form.
The loanable amount can vary depending on the bank or credit union you're working with. The minimum you can borrow is usually $5,000, while the maximum is $250,000.
Yes, you can use this loan for a variety of purposes such as expanding your business operations, purchasing new equipment or supplies, hiring new employees, and more.
Typically, the SBA guarantee is 85 percent of the total loan amount if it is under $150,000 and 75 percent if it is over that amount.

True Tamplin, BSc, CEPF®

About the Author
True Tamplin, BSc, CEPF®

True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.

True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide, a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.

To learn more about True, visit his personal website, view his author profile on Amazon, or check out his speaker profile on the CFA Institute website.