Small Business Administration (SBA) loans are a popular financing solution among small and midsized businesses thanks to their lenient qualifications and requirements and favorable terms.

But can you take out multiple SBA loans at once? In this article, we’ll discuss everything you should know before applying for multiple SBA loans, including requirements, pros and cons, and restrictions.

Key Takeaways

• There’s no limit to how many SBA loans you can have at once. However, you can only borrow up to a certain amount.
• Most 7(a) loans have a borrowing max of $5 million, while 504 loans have a $5.5 million to $16.5 million borrowing max. SBA Express and Export Express loans have a $500,000 borrowing max, whereas EIDL loans have a $2 million borrowing max.

How Many SBA Loans Can You Have?

When it comes to SBA loans, how many you have isn’t the important factor—how much you’ve borrowed is. In other words, you can take out multiple SBA loans at once, but you can only borrow up to a certain dollar amount.

For example, SBA 7(a) loans have a borrowing maximum of $5 million. Therefore, if you take out a loan for $1 million, you can borrow an additional $4 million later on. In theory, you could have two, five, or even more 7(a) loans before maxing out.

And once you start making repayments, you can re-borrow accordingly. So if you’ve taken out a $2 million 7(a) loan, and you’ve paid back $500,000, you can borrow an additional $3.5 million.

Of course, just because it’s possible to take out $5 million or more in SBA loans doesn’t mean you’ll be able to. After all, how much the SBA is willing to lend you is determined by a range of factors, including your creditworthiness, your business’ finances, and the loan’s purpose.

Lastly, there are several kinds of SBA loans, each with its own borrowing max. For SBA 504 loans, the borrowing max is $5.5 million, but you could get up to $16.5 million if your business is undertaking certain energy or manufacturing projects. SBA Express and Export Express loans have a borrowing max of $500,000, while EIDL loans have a $2 million borrowing max.

How to Get Multiple SBA Loans at Once

Meet Loan Requirements

To secure an SBA loan, your business has to meet a handful of criteria. And just like each type has its own borrowing max, each has its own eligibility requirements.

The following are eligibility requirements for 7(a) loans:

• The business must make a profit.
• It must be operating in the U.S.
• It has to meet the SBA’s definition of a small business.
• It must be unable to obtain credit “on reasonable terms” from non-government sources.

Also, certain kinds of businesses can’t secure funding through SBA 7(a) loans, including non-profits, life insurance companies, casinos, private clubs, lobbying firms, and speculative enterprises.

The following are some of the main eligibility requirements for 504 loans:

• The business must make a profit and operate in the U.S.
• Its tangible net worth must be less than $15 million.
• Average net income for the previous two years must be less than $5 million after taxes.

Additionally, the business must meet the SBA’s size requirements for 504 loans. For a full list of eligibility requirements, the SBA recommends contacting a Certified Development Company in your area.

Have a Reasonable Credit Score

In most cases you won’t need superb credit to secure an SBA loan. However, if you’re looking to secure multiple SBA loans, having good credit is definitely an advantage.

Usually, SBA-backed lenders want to see a personal credit score of 620 or higher. That said, a credit score in the low to mid 600s may not be sufficient if you’re looking to get multiple loans. In this case, a credit score around 700 is likely to yield what you’re looking for.

But your personal credit score isn’t the only score lenders consider when deciding whether or not to approve the funds you’ve requested; your business credit score will play a role too. A PAYDEX score of 80 or higher is considered good, as is an Experian business credit score of 76 or higher.

If you’re worried that you won’t be able to obtain multiple SBA loans because of bad credit, consider bringing on a co-signer. If your co-signer has impeccable credit, it will offset yours to some extent and make lenders more open to approving the funds you’re looking for.

Have Solid Business Finances

Like good credit, solid business finances aren’t an SBA loan requirement, but they can help you secure multiple loans at once.

An SBA-backed lender will want to see a handful of documents so they can assess your business’ financial health, including income statements, profit-and-loss (P&L) statements, tax returns, and balance sheets. If these documents show that your business has done well in the recent past, you should be able to get multiple SBA loans with attractive terms.

Keep in mind that a loan is an investment on the lender’s end. Therefore, if they see that your business has a hard time generating revenue and profit, they’ll be skeptical of your ability to repay debt and probably decline to extend you multiple loans.

Business history is relevant as well. Most lenders will want to see that your business has been operating for at least two years. However, if you can show consistent revenue and profit over 6-12 months, limited business history shouldn’t prevent you from getting the funding you need.

Draft Compelling Loan Proposals

In addition to a well-thought-out business plan that details how you intend to use the borrowed funds, you’ll also need to draft a loan proposal for every SBA loan you’re looking to secure.

In the loan proposals, you’ll need to clearly outline how you intend to pay the money back. If your loan proposals don’t seem feasible, lenders may decline to extend funding, even if your business’ finances are in good shape.

If you need help with drafting compelling loan proposals, consider hiring a consultant who has helped businesses secure loan approvals. They’ll tell you what points to include and what language to use so you have a solid shot at getting the funds you require.

Put up Collateral

For every SBA loan you secure, you’ll need to put up some of the loan’s value in collateral. Money in bank and investment accounts, properties, vehicles, and valuable collectibles can all be offered up as collateral. However, in many cases the collateral you offer up must be appraised by the lender before it’s deemed acceptable.

In addition to putting up collateral, you’ll also have to sign a personal guarantee, wherein you agree that the lender has the right to seize and sell your property in the event of default.

The only exception here is if you get a 7(a) loan of $50,000 or less. Collateral won’t be required but you may still need to sign a personal guarantee.

If you default on an SBA loan, and you don’t qualify for their Offer in Compromise (OIC) program, your collateral will be seized and sold to pay off what you owe. If the sale of your collateral does not yield enough to cover the loss, your lender will sell your debt to a collection agency that specializes in pursuing owed funds.

Make Down Payments

In addition to putting up collateral, you’ll have to make a down payment of 10%-30% of the loan’s value. Down payments have two purposes: they reduce a lender’s overall risk and show that a borrower is committed to the agreed-upon terms.

If your creditworthiness is good and your business’ finances solid, you’ll probably have to put up a 10% down payment. Conversely, if your credit is bad and your business’ finances look shaky, a down payment of 20%-30% is likely to be required.

Pros and Cons of Taking Out Multiple SBA Loans

Pro: Access to More Capital

Say you take out an SBA loan and use the funds as working capital. You’re not expecting to borrow again, but suddenly your commercial space has to be updated to meet new requirements. Instead of relying on same-day funding that’s likely to cost you an arm and a leg in the end, you can secure another SBA loan.

Most businesses can’t predict when they’ll need financing in the future, but you don’t have to worry about this if you can meet the SBA’s eligibility requirements. Eventually, when you need funding, all you have to do is apply for another loan. You should get what you’re looking for, especially if you’ve kept up with your current SBA loan obligations.

Pro: Flexible Lending Requirements

Securing an SBA loan shouldn’t be too hard, even if you have poor credit, shaky business finances, or limited business history. The SBA is always looking to extend a helpful hand to businesses that can’t access financing through traditional lenders, and their process is relatively straightforward.

However, if you get an SBA loan while your business’ future looks precarious, you may not get the best terms. Specifically, you may be saddled with a high interest rate and a strict repayment schedule.

Pro: Can Improve Your Credit Scores

After you secure an SBA loan, you’ll have to consistently make repayments on time. If you do, your personal and business credit scores are likely to improve. However, making repayments consistently on multiple SBA loans won’t improve your credit faster.

That said, if you can demonstrate that you’ve routinely met your obligations after borrowing a substantial sum, you should be able to secure better terms when you need financing in the future, even if you choose to get a loan from a traditional lender, i.e. a bank or credit union.

Con: More Risk

If you take out multiple SBA loans at once, you’ll expose yourself to more risk. To be fair, the same will be true if you take out multiple term loans at once, but there is a small difference.

In most cases, SBA loans have stricter terms than private loans, and this is especially true if you get one with bad credit and shaky business finances. You may get saddled with higher interest rates on all of your loans, meaning the risk of defaulting is greater.

You should never take out an SBA loan with an expectation that your loan will be forgiven in the event of default, as the SBA doesn’t extend this option to everybody.

Con: Lengthy Funding Timeline

Usually it takes 2-3 months to secure an SBA loan. Therefore, this financing solution won’t be a suitable option if you need funding fast.

The application review process takes longer because the lender you choose has to work with the SBA to determine your eligibility. Getting a private loan, on the other hand, can take as little as 1-2 weeks and in some cases, less than 24 hours.

If you need funds immediately, look into same-day funding options like a merchant cash advance (MCA).

Can You Refinance an SBA Loan With an SBA Loan?

You’re not allowed to take out an SBA loan to pay off another SBA loan. In fact, SBA loans can’t be used to pay off debt of any kind—they can only be used for business-related expenses.

If you’re looking to pay off what you owe on an SBA loan, but you don’t have the funds to do so, you’ll need to borrow from a private lender or secure a merchant cash advance. The latter will probably be your best bet, as MCAs have minimal eligibility requirements and virtually no use restrictions.

Final Thoughts

You can have multiple SBA loans at once, but you can only borrow so much. The maximum amount you can borrow is determined by the type of loans you have.

Most SBA 7(a) loans have a $5 million borrowing max, whereas 504 loans have a $5.5 million to $16.5 million borrowing max. For SBA Express and Export Express loans, the borrowing max is $500,000, while the borrowing max for EIDL loans is $2 million.

Need help securing an SBA loan? Get in touch with us today and let our experts guide you through the process!