LOANOLOGY

LENDING MYTHS

Misconceptions about SBA loans can discourage small business owners and franchisees from pursuing the financing they need to start, grow, or acquire a business. These myths often stem from outdated information or misunderstandings about the SBA lending process. With the updated SBA SOP 50 10 8 (effective June 1, 2025), it’s time to set the record straight. Below, we debunk the most common SBA loan myths and show how LoanBox’s innovative platform helps you navigate the process with confidence.

SBA LOANS:
BUSTING THE BIGGEST MYTHS AND MOSTLY MYTHS

Myth #1: Equity Buy-Ins Are Not Eligible

Reality: This myth was debunked with new SBA rules introduced in October 2023, which now permit partial equity buy-ins for SBA loans.

  • What It Means: Previously, SBA loans were often restricted to full business acquisitions or startups, but the updated rules allow financing for purchasing a partner’s equity stake (e.g., buying out a co-owner’s share). This applies to 7(a) loans, enabling partial ownership changes without requiring a full buyout.

  • SBA Requirements: Per SOP 50 10 8, borrowers must meet standard eligibility criteria, including a debt service coverage ratio (DSCR) of 1.15+, SBSS score of 155+ for loans under $500,000, or FICO score of 650–680 for larger loans. Owners with 20%+ ownership must provide unlimited personal guaranties.

  • Why It Matters: Partial equity buy-ins offer flexibility for business transitions, and LoanBox matches you with lenders who embrace these updated rules, streamlining approval.

Myth #3: SBA Loans Take Too Long

Reality: SBA loans can be processed efficiently with the right platform, debunking the notion that they’re inherently slow.

  • What It Means: Traditional SBA loan processing can take 2–4 weeks for 7(a) loans or 1–2 months for 504 loans, but modern platforms like LoanBox accelerate the process. By connecting you with experienced SBA lenders and organizing your application, approvals can occur in as little as 2–5 days for Express loans or 2–4 weeks for standard 7(a) loans.

  • SBA Efficiency: SOP 50 10 8 streamlines documentation for pre-approved lenders (Preferred Lender Program), and LoanBox leverages these efficiencies to reduce wait times.

  • Why It Matters: Faster approvals mean quicker access to funds, and LoanBox’s intuitive interface and advisor support ensure your application moves swiftly.

Myth #4: Lenders Will Always Put a Lien on My House

Reality: The SBA doesn’t mandate home equity as collateral, and strategic planning can often avoid personal property liens.

  • What It Means: For SBA loans over $500,000, lenders may require personal real estate as collateral if business assets are insufficient, but only if you have 25% or more equity in the property (per SOP 50 10 8). You can reduce this equity below 25% by taking out a Home Equity Line of Credit (HELOC), effectively bypassing the lien requirement. For smaller loans (e.g., Express loans $50,000 or less), collateral is often not required.

  • SBA Flexibility: Lenders prioritize business assets first, and personal real estate is a last resort, unlike some conventional loans with stricter collateral demands.

  • Why It Matters: Understanding collateral options protects your personal assets, and LoanBox guides you through strategies like HELOCs to minimize risk.

Myth #2: All SBA Lenders Are the Same

Reality: While SBA loans follow uniform guidelines, lenders vary significantly in their policies, criteria, and processes, creating a diverse lending landscape.

  • What It Means: The SBA sets baseline rules (e.g., 51%+ U.S. citizen or lawful permanent resident ownership, collateral for loans over $350,000), but lenders add their own requirements, such as higher DSCR thresholds (1.25–1.50), specific industry preferences, or unique collateral policies. Some lenders are more flexible with startups, while others prioritize acquisitions.

  • SBA Deference: Per SOP 50 10 8, the SBA often defers to lenders’ internal standards for creditworthiness, collateral, and risk assessment, leading to varied approval outcomes.

  • Why It Matters: Choosing the right lender is critical, and LoanBox’s AI-driven matching connects you with those whose criteria align with your business’s financial profile, avoiding mismatches and delays.

FINANCE
YOUR WAY 

DO-IT-YOURSELF BUSINESS LOANS

  1. Complete application and loan package

  2. See matching lenders

  3. Select one or all matching lenders to access your loan package

  4. Receive loan proposals from interested lenders

  5. Select the winning lender and e-sign their loan proposal

Use the tools and intel available, follow the process, receive alerts at every stage along the way, and utilize LoanBox human support as needed.

LOANBOX ADVISOR SUPPORTED LOANS

  1. Complete applicant summary form

  2. Have consultation

  3. Upload the docs requested

  4. Receive, discuss, and approve your LoanBox Advisor plan

  5. Provide needed docs as requested as your Advisor navigates everything for you

Your loan is still managed on the LoanBox platform, so you still have access to the same lenders and receives the same alerts.