Talk to the SBA and Get It DUN!
What is the SBA? What is the Small Business Administration?
According to their website, the Small Business Administration (SBA) is an organization that was established in 1953 with the goal of helping small business owners and entrepreneurs pursue the American Dream. The SBA is a federal agency that is dedicated to serving as the voice of small businesses and providing them with counseling on capital and contracting expertise. Since its founding, the SBA has supplied loans, contracts, counseling sessions, and other forms of assistance to small businesses.
What does the SBA do?
The Small Business Administration provides a range of financing for small businesses including small microlending to debt equity and investment capital. The SBA has 1,800 locations throughout the country and can provide free counseling and low-cost training to existing small businesses and new entrepreneurs. Additionally, the SBA reviews congressional legislation and testifies to represent the best interests of small business owners and entrepreneurs. The SBA has compiled standard operating procedures (SOP) that detail the rules of how certain activities should be performed.
There are certain laws, regulations, and policies that guide the SBA. Important legislation surrounding the Small Business Administration includes The Small Business Act and The Small Business Investment Act. Learn more about the legislation surrounding the SBA here.
What is an SBA standard 7(a) loan?
The SBA 7(a) is a very common small business loan that is issued by private lenders and backed by the Small Business Administration. The SBA 7(a) loan can be difficult to obtain but is a preferred financing option for businesses because of the extended repayment terms and lower interest rates. The SBA 7(a) has various loan types that will fit businesses based on the funding the business will need and how they intend to use the funding. Below is a chart of different SBA 7(a) loans.
The SBA 7(a) loan interest rates are set based on prime rates which is a benchmark provided by the actions of the Federal Reserve Board. For these loans, the current maximum SBA 7(a) loan rates are as follows:
THE RATES LISTED ARE SUBJECT TO CHANGE SO BE SURE TO CHECK BACK WITH THE SBA AND YOUR LENDERS FOR UPDATED RATES AND REQUIREMENTS.
SBA Express and Export Express loans are subject to a different set of interest rate guidelines.
Prime rate plus 4.5% for loan amounts of over $50,000.
Prime rate plus 6.5% for loan amounts of $50,000 or less
Note that the interest rate is only one part of the overall cost of a 7(a) loan and most SBA 7(a) loans will have a guaranty fee, which ranges from 0.25% to 3.75% based on the size of the loan. Regardless of the loan type, there are requirements that companies must meet in order to be eligible for loans through the SBA. Some criteria include:
Must be a for-profit business operating in the U.S. Certain types of businesses are not eligible.
Must be a small business, as defined by the SBA.
Invested your own time and money into your business.
Must have sought out other forms of financing before turning to an SBA loan.
Must be able to demonstrate the need for a loan and show the business purpose for which you’ll use the funds.
Cannot be delinquent on any existing government loans.
Be able to provide collateral for loans larger than $25,000.
There is not an exact designated credit score that lenders look for to determine business creditworthiness, but typically lenders like to see at least a 690-credit score or higher, solid annual revenue generated by the company, and business operations spanning at least 2 years.
Learn more about the SBA here.
If you run into roadblocks with traditional lenders, look into other options like working with Factoring Companies. But, regardless of who you work with, good credit will help get you places.
Establishing Business Credit
Understanding start-up costs and expenses are important for every new business, and owners will also want to make sure that their credit is in good standing. Poor credit history is part of the reason why small business loan applications are declined. Credit history can impact interest rates and how attractive a company appears to potential partners, buyers, and suppliers.
Loan eligibility for new businesses is typically established based on the owner’s personal credit score. The Consumer Financial Protection Bureau will provide tips for helping people with limited credit history. Establishing credit and managing credit history can help secure financing when needed and potentially offer more favorable terms when your credit is in good, if not excellent standing. One of the recommended first steps for any business establishing credit is to register with Dun and Bradstreet to get a DUNS number. Regularly checking and monitoring credit history will help business owners have access to the funding options to help run their businesses.
Who are Dun and Bradstreet?
Dun and Bradstreet is an organization that uses data, analytics, and data-driven solutions to assist clients. Data and insights are delivered through the Dun & Bradstreet Data Cloud and comprise millions of business records, curated from tens of thousands of sources. The Data Cloud helps DnB clients improve the performance of their organizations both at departmental levels, as well as across their businesses.
Dun and Bradstreet can give organizations the information they need pertaining to customers, suppliers, and partners. This information, such as credit, is a big factor in determining if an organization is worth conducting business with.
The list of products that Dun and Bradstreet offer include:
Credit and risk management
Sales and marketing
Software and subscriptions
What is a DUNS number?
Dun and Bradstreet use the data they collect to create Live Business Identities for organizations. A DUNS number, which stands for Data Universal Numbering System, is a unique 9-digit identifier for businesses. DUNS numbers are distributed to organizations only after it is determined the company is unique from any other record in their Data Cloud. These records are comprehensive and continually updated to give the best view of a company in the Data Cloud. Financial institutions use this profile to look at a company’s business credit report to determine if they should grant a loan or extend credit as well as what terms to offer. Applying for a DUNS number is easily done through the DnB website and requires just a few steps.
Why do I need a DUNS number?
DUNS numbers go a long way in identifying the credit history of a company and is used around the world to identify and access business information. Potential partners or lenders can request a business credit report about your business using your DUNS number or other business identifiers. You can equally use a DUNS number to access the same information about any company with whom you may want to work with. It wouldn’t be far-fetched to consider DUNS numbers as dynamic descriptors used to identify any company in the world.
The Live Business Identity is compiled of general company information, corporate family relationships, and credit scores or ratings that indicate the financial health of a company. The Live Business Identity is an ongoing business profile that details the history of any company. DUNS numbers can establish credibility with lenders and expedite applications for loans and contracts depending on a company’s Live Business Identity. DUNS numbers are also useful in lowering barriers and allowing companies to conduct business with the government or companies outside of the United States. DUNS numbers allow other companies to gain a complete understanding of the story of your company to determine if they should conduct business with you or not. Proper recordkeeping is important and your Business Credit File can be monitored through Dun and Bradstreet’s website.
And it looks like we’re all DUN here.
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