Bank of America SBA Loans: Top Options and How to Apply
Bank of America SBA Loans: Everything You Need to Know
If you’re searching for SBA loans, you might turn to one of the most well-known banks in the U.S., like Bank of America (BoA).
What can Bank of America offer when it comes to these government-guaranteed business loans?
We’re here to help. In this guide, we’ll break down everything you need to know about Bank of America SBA loans—including the options they offer, how to qualify, as well as the pros and cons of choosing BoA as your SBA lender.
The Ultimate Guide to Bank of America SBA Loans
Types of Bank of America SBA Loans
First and foremost, let’s briefly explain how Bank of America SBA loans differ from other types of financing from BoA.
With typical Bank of America business loans, Bank of America lends to businesses exclusively at their own risk and the terms, requirements, and processes involved are only subject to Bank of America’s lending guidelines.
As an SBA lender, on the other hand, Bank of America offers loans that are part of SBA loan programs. In doing so, Bank of America is held to the SBA guidelines for these programs—and in exchange—the SBA offers a guarantee on these loans.
Typically, the SBA will guarantee up to 85% of the amount of a loan. This being said, it’s important to remember that the SBA doesn’t actually issue these loans. Instead, Bank of America works with the SBA through these loan programs and they are the ones who issue and fund these loans.
With this in mind, Bank of America offers four types of SBA loans:
- PPP Loans
- SBA 7(a) Loans
- SBA Express Loans
- SBA CDC/504 Loans
Bank of America PPP Loans
The Paycheck Protection Program (PPP) is a program that was created as part of the CARES Act to offer financial assistance to small businesses affected by the coronavirus pandemic.
Through this program, businesses can apply for 100% government-guaranteed loans to cover payroll and other operating expenses.
These loans are available in amounts up to 2.5x the business owner’s average monthly payroll costs, not exceeding $10 million.
PPP loans are being issued by a variety of banks and financial institutions—including Bank of America.
To be eligible for a PPP loan from Bank of America, you must be an existing small business or commercial banking client as of February 15, 2020. If you are eligible for this Bank of America SBA loan, you can complete the application online.
All small businesses impacted by the coronavirus outbreak should apply for a PPP loan. If you’re not eligible for a PPP loan through Bank of America, you should check with your local community bank and see if they’re accepting PPP applications.
Bank of America PPP Loan: Rates and Terms
As a specialized program, PPP loans from Bank of America will abide by the guidelines as dictated by the CARES Act—and therefore, will be different from any of the other SBA loans Bank of America offers.
These loans will have:
- An interest rate of 1%
- A maturity of 2 years
- The first payment deferred for six months
- No collateral
- No personal guarantees
- No borrower or lender fees payable to SBA
Bank of America 7(a) Loans
Of all of the SBA programs, the 7(a) loan program is perhaps the most common.
This being said, Bank of America offers SBA 7(a) loans ranging in loan amounts from $25,000 to $5 million. These loans can be used for a variety of purposes, including:
- Purchasing equipment or inventory
- Supplying working capital
- Purchasing or refinancing commercial real estate
- Funding construction or improvements
- Purchasing or expanding a business
In this way, a Bank of America SBA 7(a) loan is a great option for small businesses looking for flexible and affordable financing.
Bank of America 7(a) Loan: Rates and Terms
Overall, the Bank of America SBA loan rates and terms you receive will depend on your qualifications. This being said, however, you can generally expect the following for 7(a) loans:
- Up to seven years for working capital
- Up to 10 years for equipment purchases
- Up to 20 years for real estate (25-year amortization)
Bank of America doesn’t publicize interest rates for their SBA loans, but typically the rates on 7(a) loans range from the Prime rate + 2.25% to the Prime rate + 4.75%.
Additionally, BoA will charge an SBA guarantee fee, among other possible fees. For their 7(a) loans, Bank of America offers a down payment as low as 10%.
Bank of America SBA Express Loans
In addition to typical SBA 7(a) loans, Bank of America also offers SBA Express loans.
Technically, SBA Express loans are part of the 7(a) program, however, they have a few important differences.
First and foremost, as the name implies, SBA Express loans are processed much faster than other SBA loans. These loans are processed within 36 hours—whereas other 7(a) loans may take weeks to process.
Additionally, SBA Express loans are available in smaller amounts, up to $350,000, compared to the $5 million maximum with other 7(a) loans. Express loans, like all 7(a) loans, can be used for a variety of purposes—working capital, inventory and equipment purchases, real estate, and more.
In this way, Bank of America SBA Express loans are worthwhile if you need access to a smaller amount of capital and are looking for fast funding.
Bank of America SBA Express Loan: Rates and Terms
Like any 7(a) loan, the Bank of America SBA loan interest rates and terms you receive with their Express loan will vary based on your qualifications.
Once again, however, you can generally expect the following with these loans:
- Terms up to seven years for working capital or inventory purchases
- Terms up to 10 years for equipment purchases
- Terms up to 20 years for real estate
- Down payment as low as 10%
- Interest rates of the Prime Rate + 4.5% to 6.5%
You should also anticipate paying a guarantee fee, as well as other processing or origination fees with a Bank of America SBA Express loan.
Bank of America CDC/504 Loans
Finally, the last type of SBA loan offered by Bank of America is the CDC/405 loan.
Unlike the 7(a) loans, however, SBA CDC/504 loans are actually made up of three parts. The first part of the loan is issued by a bank (in this case, Bank of America), the second part is issued by a Certified Development Company (CDC), and the third part is provided as a down payment by the borrower.
This being said, however, as a preferred lender, if you apply for a CDC/504 loan through Bank of America, they’ll be able to help you find a local CDC to work with.
Additionally, CDC/504 loans are only available to finance the purchase of fixed assets—such as real estate, land, large pieces of equipment, etc.
Bank of America offers CDC/504 loans with an amount minimum of $350,000 for an overall project size of $700,000 or more—or $500,000 for ground-up construction of an overall project size of $1 million or more.
These Bank of America SBA loans are ideal for affordably financing long-term real estate projects, as well as construction and equipment purchases.
Bank of America SBA CDC/504 Loan: Rates and Terms
Like all of the BoA SBA loan options we’ve discussed, the rates and terms on the CDC/504 loans will vary.
Generally, however, these loans have:
- Terms of up to 10 years for equipment purchases
- Terms of up to 20 years for real estate and construction
- Down payment as low as 10%
The SBA loan rates on CDC/504 loans will be more complex, as they’ll consist of the interest rates on the CDC portion of the loan, as well as the bank portion.
Although the SBA regulates the CDC rates, Bank of America will be able to implement their own rates—meaning these rates are often higher than the CDC rates. Overall, though, the rates on these loans typically range from about 5% to 6%.
Once again, BoA may also charge a variety of fees on this type of loan as well.
How to Qualify for a Bank of America SBA Loan
Ultimately, all SBA lenders and loan programs have their own unique eligibility requirements.
According to Bank of America’s website, however, they have three initial requirements for SBA loan applicants:
- You must own and operate a for-profit business
- Your business must be legally organized as a sole proprietorship, corporation, partnership or LLC
- Your business cannot generally qualify for conventional credit
Overall, these are general requirements that the SBA also implements for their loan programs. In addition to these qualifications, businesses applying for a Bank of America SBA loan should:
- Be physically located and operated in the U.S. or its territories.
- Have a business owner that’s invested their own time or money into the business
- Meet the SBA definition of a small business
- Not have delinquencies or defaults on previous government debt
Moreover, you’ll typically want to have at least two years in business, excellent personal credit, and strong business financials to qualify for an SBA loan from Bank of America (or any lender).
How to Apply for a Bank of America SBA Loan
Now that you know what kind of SBA loans Bank of America offers and how to qualify for these products, you’re likely wondering how to actually apply.
On the whole, SBA loan applications are lengthy and time-consuming, requiring significant documentation. Additionally, like the qualifications for these loans, the specific application process will vary based on the lender and loan program you’re applying for.
This being said, however, when applying for an SBA loan with Bank of America, you can work with one of their SBA specialists to guide you through the process. In fact, Bank of America requires that you start the application process by visiting a branch or speaking with a representative on the phone.
Moreover, according to their website, their SBA loan packages typically require: a personal financial statement, three years of business and personal tax returns, SBA–required forms, information about all owners, and an explanation of how a loan will help the business.
On top of these requirements, you might also need to include any or all of the following documents:
SBA Loan Application Which Includes:
- Personal background information
- Business background information
- Business plan
- Personal and business tax returns
- Personal and business credit scores
- Business financial statements
- Business debt schedule (if applicable)
- Legal documents
Again, it’s important to remember that Bank of America will indicate specifically the documentation and information they need for your application.
Therefore, it’s best to prepare any and all SBA loan requirements you can ahead of time—and then work with Bank of America through the application process.
As we mentioned above, you can start this process by making an appointment to talk to a BoA SBA loan specialist on the phone or visit a Bank of America branch in-person.
Pros and Cons of Bank of America SBA Loans
When it comes down to it, Bank of America is only one of the hundreds of small business banks across the U.S. that offer SBA loans.
Therefore, before you decide to start the application process with BoA, it’s important to consider the pros and cons of their particular program.
Pros
- Bank of America is a preferred SBA lender—meaning they have the experience required to expedite and most efficiently process SBA loans.
- Bank of America is one of the 100 most active 7(a) lenders—with 101 approved loans for a total of $46,762,400 as of December 2019.
- BoA offers multiple SBA loan options, including Express loans, which are a great solution for fast, affordable funding.
- As a national bank, you can expect BoA to offer their SBA loans with low interest rates and long terms.
Cons
- Bank of America approves significantly less SBA loans than their competitors. As of December 2019, BoA was 20 out of the top 100 7(a) lenders—competitors like Wells Fargo, Chase, TD Bank, and Huntington National Bank, however, all approved more loans.
- As a larger, national bank, you can expect the SBA loan application process with BoA will be document-intensive and it may take weeks (or even months) for your application to fund.
- Bank of America requires that you schedule an appointment for a phone call or branch meeting to start the application process.
The Bottom Line
At the end of the day, Bank of America has a lot to offer as an SBA preferred lender.
Therefore, if you’re looking for one of the SBA loans that Bank of America provides, you certainly might consider working with BoA.
In particular, Bank of America SBA loans will be an even better option for your business if you already have an existing relationship with BoA.
On the other hand, if you’re not a current Bank of America customer, you might first see if a bank you currently work with offers SBA loans.
Ultimately, however, whatever route you decide to take for your business financing, you’ll want to be sure you compare all of your viable options to ensure you find the most affordable, most desirable solution for your needs.
