Capital One SBA Loan Program: What You Need to Know
It makes sense that Small Business Administration (SBA) loans are some of the most popular business loans on the market. With longer payback periods, higher borrowing limits, and lower interest rates, SBA loans are an ideal financing option for small businesses.
Plus, SBA loans are available from a variety of big banks and other financial institutions, including those that are well-known for their small business-friendly products, like Capital One. What does Capital One have to offer when it comes to SBA loans—and is a Capital One SBA loan right for your business?
In this guide, we’ll review the types of Capital One SBA loans available, how to qualify and apply for one of these products, as well as why you might choose to work with Capital One over a different SBA lender.
The Ultimate Guide to the Capital One SBA Loan Program
Capital One SBA Loan Options
If you had been wondering, “Does Capital One do SBA loans?” you may have gathered by now that the answer is yes, they do. Not only does Capital One offer SBA loans, but they’re an SBA preferred lender and a top 100 most active 7(a) lender according to the most up-to-date list from the SBA.
If you’re interested in an SBA loan from Capital One, you likely already know how SBA loans work. As a reminder, SBA loans are loans that are guaranteed by the SBA and issued by their lending partners, including banks, financial institutions, and even community organizations.
Typically, the SBA will guarantee up to 85% of the loan amount, incentivizing their lending partners, like Capital One, to work with small businesses they normally wouldn’t approve. Therefore, if you get a Capital One SBA loan, the funds themselves will come from Capital One and the SBA will provide a guarantee on the loan, mitigating the risk for Capital One in the event you can’t pay the loan back.
Overall, there are a number of SBA loan programs and Capital One participates in two of the most popular—the 7(a) loan program and the CDC/405 loan program.
Capital One SBA 7(a) Loans
Of all of the SBA loan programs, the 7(a) loan program is perhaps the most popular. To this point, although there is a general SBA 7(a) loan, there are also a number of additional loan options that fall within the purview of this larger program.
This being said, Capital One offers the standard SBA 7(a) loan, as well as the SBA Express loan. On the whole, Capital One doesn’t provide many details about their SBA loan program on their website, however, they do say that the 7(a) loan program “provides a wide range of options for small businesses, including start-ups, existing businesses in underserved or rural areas, or military-owned businesses.”
Overall, Capital One SBA 7(a) loans will be ideal for businesses looking for an affordable form of long-term financing—whether they need it to expand their business, purchase equipment, manage cash flow, or even refinance debt.
With this in mind, although the details of your potential Capital One 7(a) loan will be unique to your business, here’s what you can expect in a general sense:
Loan amounts: As per the program restrictions, SBA 7(a) loans from Capital One will be available in amounts up to $5 million.
Terms: The terms for a 7(a) loan will vary based on what you intend to use the proceeds for. Generally, you can expect terms of seven years for working capital loans, 10 years for equipment loans, and 25 years for real estate loans.
Of the limited information on their website, Capital One does mention that their SBA loans offer longer payback terms, fixed maturity, and no balloon payments.
Rates: Unfortunately, the rates you receive on a Capital One SBA 7(a) loan will largely vary based on your business’s qualifications, as well as your loan purpose. Although Capital One has the discretion to set your individual interest rates, they are subject to the maximum rates as set by the SBA.
This being said, your interest rate can range anywhere from the market prime rate plus 2.25% to the prime rate plus 4.75%. Of course, the better your business’s qualifications, the more likely you are to receive a lower interest rate.
In addition, you may also face certain fees on your Capital One SBA loan. According to the Capital One website, “Lender fees will be charged in addition to the SBA guarantee fee and vary depending on the loan you select. For example, you will be charged a packaging fee of up to $1,500 and other closing costs if you select a SBA 7(a) loan.”
Capital One SBA Express Loans
Once again, Capital One doesn’t offer much upfront information about their SBA Express loan program, other than you can contact a representative directly for details.
This being said, a benefit of looking into the Express program over the standard 7(a) loan is the faster processing time. Whereas standard 7(a) loans can take anywhere from days to weeks to process, SBA Express loans require credit decisions in 24 to 36 hours.
The downside of this speed, however, is that you’re likely to see a slightly higher interest rate with this type of Capital One SBA loan. Interest rates range from the prime rate plus 4.5% to the prime rate plus 6.5%. Additionally, loan amounts are only available up to $350,000. The terms and eligible loan purposes, on the other hand, are the same as the standard 7(a) loan.
In essence, this type of SBA loan is ideal for businesses who need long-term, affordable financing, but can’t necessarily wait for the slower processing time of a standard 7(a) loan (and are therefore willing to pay a slightly higher interest rate).
Capital One SBA 504/CDC Loans
The other SBA loan program that Capital One offers is the CDC/504 loan program. Unlike the 7(a) loan, which can be used for a variety of purposes, this loan is designed specifically for businesses who need to make large fixed asset purchases, like real estate or equipment.
Additionally, whereas 7(a) loans are structured just like traditional term loans issued by Capital One, SBA CDC/504 loans are a little more complex. These loans are made up of three pieces—one piece is issued by the bank, in this case, Capital One, one piece is issued by a community development company (CDC), and the final piece is provided by the borrower.
In this case, therefore, Capital One would issue their portion of the loan, as well as work with a CDC to provide that portion.
According to the Capital One website, loans from their CDC/504 program are long-term with fixed rates, they have a lower equity requirement, and the soft costs can be rolled into project financing. Once again, just like the Capital One SBA 7(a) loans, many of the details will depend on your business’s needs and qualifications.
In general, though, here’s what you can expect with these loans:
Loan amounts: CDC/504 loans are typically available in amounts up to $5.5 million.
Terms: Overall, terms for these SBA loans range from 10 to 20 years.
Rates: The interest rate you receive, due to the way these loans are structured, will also be a little more complex—as part will come from Capital One and part from the CDC. On the whole, however, these SBA loan rates tend to fall between 5% to 6%.
In addition, you’re likely to see an SBA guarantee fee, as well as specific lender fees from Capital One on these loans as well.
Ultimately, although there’s nothing saying you can’t use a Capital One SBA 7(a) loan for real estate or large equipment purchases, you might find that a CDC/504 loan can offer more desirable rates and terms for this type of need—depending, of course, on your business’s qualifications.
Advantages of the Capital One SBA Loan Program
When it comes down to it, although Capital One offers two of the most popular types of SBA loans, it’s difficult to understand specifically what their programs look like without talking to a Capital One banking associate.
With this in mind then, you may be wondering: Why work with Capital One over another SBA lender?
At the end of the day, it will be up to you decide if Capital One is the right lender for your business, however, here are two specific advantages of working with this bank that are worth considering:
Preferred SBA Lender
As we mentioned briefly above, Capital One is a preferred SBA lender. In short, this means that Capital One has significant experience processing, packaging, and issuing SBA loans.
Although this isn’t always the case, generally SBA preferred lenders have the ability to process and offer loans faster than other lending partners. Additionally, the experience required to receive the preferred lender designation implies other benefits for your business.
Considering the experience Capital One has with these loans, they’ll be able to answer your questions, package your loan, and generally assist you through the SBA loan application process in the most efficient way possible.
Along these lines, and again, as we mentioned above, Capital One is also a top 100 most active SBA 7(a) lender—meaning they have particular expertise with this loan program and see consistent results. In the fourth quarter of 2019, Capital One approved 34 SBA 7(a) loans for a total amount of $44,598,800.
To this point, if you’re looking for an SBA loan from a bank with long-standing experience and expertise, Capital One will be able to meet those qualifications.
Business Partnership Philosophy
Another benefit to choosing Capital One bank SBA loans? On the whole, Capital One operates on (and is well-known for) a business partnership philosophy—which, according to their website, means they serve as a partner for your business and work with your unique needs in mind.
This may seem like a small detail, but you can see this philosophy in practice throughout Capital One’s suite of business products. For example, with their general business loans, Capital One offers relationship-based rates for existing customers and is often willing to customize a specific program for the financing needs of your business.
Generally, Capital One is extremely small business-friendly, but is even more so for businesses who already have an existing relationship with them—whether that’s through a credit card, bank account, or other Capital One business loan.
Therefore, Capital One SBA loans will certainly be a top option for businesses who already bank with Capital One, as well as those who are looking for an institution focused on customer service, as well as develop a long-standing relationship with their customers.
How to Qualify and Apply for a Capital One SBA Loan
So, with this in mind, if you think a Capital One SBA loan might be right for your business, you’re likely interested in how you can qualify and apply.
When it comes down to it, although it may be easier to qualify for a Capital One SBA loan than other Capital One business financing products, you’ll still need to meet top requirements to be approved for one of these loans.
This being said, on the Capital One website, they list three overarching requirements to be able to qualify:
- Your business must be a for-profit business located in the U.S.
- You must meet eligibility requirements for SBA 504 or 7(a) loans.
- You must get together with one of their business bankers at a Capital One location.
Ultimately, although Capital One will be able to impose their own standards to determine whether you qualify for an SBA loan, there are general SBA loan requirements that you’ll need to meet, as outlined by the SBA. These include:
- Meet the SBA’s definition of a small business
- Have invested some of your own time and money into your business
- Have exhausted other financing options
- Show that you have “good character”
- Be operating in an eligible industry
- Not be delinquent on other government loans
- Show your ability to repay and have a sound business purpose
The last point is important, because even though there are no hard and fast rules for credit score, time in business, and annual revenue, these will be three key pieces of information used to determine your loan eligibility.
Generally, Capital One (as well as other SBA lenders) will want you to have excellent personal credit, at least two years in business, and strong business financials. It will also be helpful if you can offer some type of collateral on the loan.
Ultimately, it’s impossible to know exactly the requirements Capital One imposes without working with them directly. Therefore, if you’re interested in a Capital One SBA loan, it will likely be useful to talk to a banking representative before going in to submit an application.
How to Apply for a Capital One SBA Loan
As you may imagine based on our discussion thus far, you’ll need to speak to a Capital One representative to learn the specifics of their SBA loan application process.
In general, however, it’s important to understand that this process will require extensive documentation and the entire process may take anywhere from 60 to 90 days to complete. This being said, in order to expedite the SBA loan timeline, you’ll want to prepare any and all documentation you can ahead of time.
Although a Capital One representative will be able to tell you exactly what you’ll need, the following list includes some of the documentation you’ll likely be asked to provide:
- Loan request amount and detailed allocation of funds
- Business plan
- Business financials (profit and loss statement; balance sheet; projected financials for next one to three years; last two years’ worth of tax returns; business credit history)
- Proof of ownership
- Loan application history
- Personal financials (personal financial statement; tax returns for last two years; credit history)
- Owner résumés
- Collateral offerings in case of default
- Personal guarantee
Of course, there will be differences for the requirements of a SBA 7(a) loan vs. a CDC/504 loan, so you’ll have to speak to a Capital One associate and (unlike some types of business loans) visit a branch in order to actually complete the application process.
Alternatives to Capital One SBA Loans
Before you decide that Capital One is the right SBA lender for you, it’s worth remembering that there are hundreds of other SBA lenders out there.
In fact, if you’re not currently a Capital One customer, you might want to start your SBA loan search with a bank you already have a relationship with. From Chase to Wells Fargo, other top small business banks also offer SBA loans—and it will likely be easier to work with a bank where you’re already a customer.
On the other hand, if your bank doesn’t offer SBA loans, or you simply want to consider other options, you might turn to the list of most active SBA 7(a) lenders we mentioned earlier. Although Capital One makes the list, they’re fairly far down, meaning there may be a bank higher up on the list that will be more likely to offer you an SBA loan.
For example, whereas Capital One only approved 34 SBA 7(a) loans through December 31, 2019, Wells Fargo approved 1,264 and Chase approved 844. Although you’ll still need to meet the necessary requirements to qualify for an SBA loan from either of those banks, there’s no doubt that they’re lending at a much higher rate than Capital One.
To this point, you might also look into Huntington National Bank, Celtic Bank, or U.S. Bank—all of which make the top 10 here.
Moreover, you might find that another SBA lender may offer a different program—like the SBA microloan program or SBA CAPLines program—or have unique requirements that are better suited for your business. For instance, although, like Capital One, Chase also offers SBA 7(a) loans, they’re known for being particularly startup-friendly. This means, whereas most lenders will require at least two years in business, you might be able to qualify for a Chase SBA loan regardless of your time in business.
Frequently Asked Questions
The Bottom Line
At the end of the day, if you’re looking for affordable, long-term financing, there are few options more desirable than an SBA loan. This being said, however, it’s up to you to determine whether a Capital One SBA loan—either a 7(a) or CDC/504 loan—is best for your business.
As we’ve discussed, Capital One is an SBA preferred lender and notable small-business friendly, so if you’re currently a Capital One customer, it’s certainly worth talking to a representative about your financing needs.
On the other hand, however, there are a number of other banks and financial institutions who offer the same SBA loan programs, if not more, so it’s important to compare all of your options before making a final decision.
Plus, regardless of the specific SBA lender you’re considering working with, it’s worth remembering that you’ll need to have solid credit, financials, and time in business to qualify for an SBA loan. If you don’t think you’ll be able to qualify, you’ll want to explore your options from alternative lenders, which will likely have more lenient requirements.