Dear << Test First Name >>

We know we’re preaching to the choir here when we say that access to capital remains one of the most significant challenges for small and medium enterprises worldwide. Without investment (either through debt or equity), many brilliant businesses simply won’t be able to achieve their potential.

In this newsletter, we’re going to explore one interesting funding mechanism that has revolutionized small business growth in the USA – the SBA loan. We’ll also delve into some of the timeless principles surrounding business funding so that even if you aren’t in the USA, you can still learn a lot about securing the funding you need for your business.

The power of SBA loans

An SBA (Small Business Administration) loan is a type of business loan partially guaranteed by the US government to provide support to small businesses. It has completely transformed business funding in the US by providing entrepreneurs with access to capital at competitive rates, with flexible terms and government backing.

These loans reduce lender risk significantly, making it possible for small businesses to secure funding for various needs - from startup costs and working capital to expansion initiatives and real estate acquisitions.

There are three main types of SBA loans:

SBA 7(a) loans are typically used for working capital, equipment, furniture, commercial property, business acquisitions, and partner buyouts. The maximum loan amount is $5 million and the maturity can be up to 25 years depending on the specific circumstances.

SBA express loans are a sub-category of 7(a) loans and are generally used for equipment and working capital. These are smaller in size (maximum of $500k) but they are faster to access and have lower down payment requirements.

SBA 504 loans are typically used for buying land, financing long-term machinery, purchasing buildings, and refinancing existing commercial real estate debt. The lending is typically split between a private lender and a certified development company (CDC) operating in the area. They cannot be used for working capital or inventory.

What makes SBA loans truly remarkable is their scale and flexibility. With loan amounts reaching up to $5 million and extended repayment terms often spanning 10-25 years, these financial instruments provide the breathing room many businesses desperately need to establish themselves and grow sustainably.

Inside the SBA loan process

It’s important to understand that the SBA doesn't directly lend money to businesses. Instead, it guarantees a portion of loans made by approved lenders (typically banks and credit unions). This government backing significantly reduces risk for lenders, encouraging them to finance businesses that might otherwise struggle to secure traditional funding.

The application process itself is rigorous but navigable with proper preparation:

Qualification: Businesses must meet size standards, demonstrate good character, have reasonable owner investment, and show capacity to repay.

Documentation: Lenders require comprehensive financial statements, tax returns, business plans, and collateral information.

Underwriting: Lenders scrutinize financials, cash flow projections, and overall business viability.

Approval and funding: Once approved, disbursement typically occurs within 30-45 days.

Due to the nature of the application process, an entire industry of professional advisors has popped up to service this need and help companies ready their businesses for the application.

The importance of preparation

Recent statistics underscore the competitive nature of SBA lending. In the 2024 fiscal year, the SBA approved over 76,000 loans worth approximately $37.8 billion, but when you consider that approximately 5 million businesses are started in the USA every year, you get a sense as to how difficult it can be to stand out from the rest.

However, the most successful applicants share a common trait: thorough preparation. Lenders want to see not just current financial health, but also evidence of sound financial management and realistic growth projections. This includes not just basic profit and loss statements, but detailed cash flow analyses that demonstrate an understanding of business rhythms and seasonality.

The preparation gap explains why businesses with similar financials can experience radically different outcomes in the application process. Those who invest time in preparation not only increase their approval chances but typically secure more favourable terms and larger loan amounts. Moreover, the preparation process itself often reveals valuable insights about operational efficiency and growth opportunities that benefit the business regardless of funding outcomes.

How bizval can help you navigate the process

At bizval, we recognize that preparation is key, which is why we're developing loan readiness assessments designed to streamline the funding process for both applicants and lenders.

These comprehensive assessments will:

• Ensure applicants meet qualifying criteria before they apply, saving valuable time and reducing delays;

• Help lenders improve efficiency and boost approval conversion rates; and

• Provide actionable insights so businesses understand the implications of their financial decisions

Our approach involves working closely with business owners to highlight how specific financial choices affect the bottom line. Using our bizval live valuation and scenario tools, we can forecast how these decisions could impact a P&L over the next five years, helping businesses plan strategically while reducing the risk of loan defaults for financial institutions.

If this is something that interests you, be sure to get in touch today, and let’s explore how we can help.

Why this matters outside of the USA

While the UK and various other parts of the world don't have direct SBA equivalents, understanding these models is increasingly important for several reasons:

• Firstly, the concept of government-backed lending to support small businesses has transformative potential. Implementing similar programs could unlock billions in capital for SMEs across both countries, which could be particularly important as economic uncertainty persists.

• Secondly, many UK and international businesses are exploring international expansion into the US market. Understanding the SBA system provides valuable insights into potential funding opportunities abroad.

• Finally, the principles behind successful SBA applications — thorough financial documentation, strategic planning, and professional valuation — are universally applicable. Whether you’re seeking funding in London, Cape Town, or Los Angeles, these fundamentals remain constant.

The bigger picture

SBA loans showcase what's possible when financial systems work in favour of business owners rather than against them. While the UK and other international markets operate differently, the principle remains: better funding access means stronger businesses and more robust economies.

As conversations around small business financing continue to evolve, understanding these models helps entrepreneurs and advisors stay ahead of the curve.

At bizval, we're committed to helping you navigate the complexities of business funding - whether you're securing capital, determining an accurate valuation, or guiding clients toward sustainable growth or a successful exit.

Ready to take the next step in your business funding journey? Let's talk about how we can help you prepare for success.