SBA Community Advantage Loans: What You Need To Know

Learn whether your qualify and how to apply

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The Community Advantage (CA) loan program is a pilot initiative established by the Small Business Administration (SBA). Its purpose is to meet the needs of businesses in underserved communities that might not qualify for a traditional loan. Unlike traditional SBA 7(a) loans, the CA loans program partners with mission-focused lenders that provide credit, technical, and management assistance to entrepreneurs. 

Learn if you may qualify for the CA loan, the process for applying, and how the funds can potentially help your business expand its reach. 

Key Takeaways

  • The purpose of the SBA Community Advantage loan program is to increase the number of 7(a) lenders providing loans to underserved communities throughout the U.S.
  • Lenders in the CA program include community development organizations, non-profit organizations, and SBA-approved microlending
  • The maximum loan amount is $250,000 and repayment periods range from 10 to 25 years 
  • Loans can be used to offset startup costs, equipment, renovations, and real estate purchases but cannot be used as a revolving line of credit.

How the Community Advantage Loan Program Works

The SBA’s CA loan program is geared toward small businesses and entrepreneurs in underserved communities. Here’s how the CA loan works, how to qualify, the financial details, and what it can be used for. 

Lenders and Criteria

Unlike traditional SBA loan programs, the CA initiative partners with mission-focused lenders that are committed to working with these communities. 

These lenders include:

  • Certified development companies
  • Intermediary lending pilot program intermediaries 
  • Microloan program intermediaries
  • Non-federally regulated community development financial institutions (CDFIs) that are certified by the U.S. Treasury Department

Mission-focused lenders such as CDFIs look for the following criteria for businesses in underserved communities:

  • Employ at least 50% of workers residing in low-to-moderate income communities
  • Located within empowerment zones, enterprise communities and SBA HUBZones, opportunity zones, and rural areas 
  • Startups that are no more than two years old 
  • Veteran-owned

CA Loan Specifications 

Mission-based lenders provide credit, management, and technical assistance to small businesses to effectively scale their companies. Here are some important details regarding the CA loan program: 

  • The maximum loan amount that lenders can provide is $250,000 with the SBA setting the maximum interest rate at the prime rate plus 6%. 
  • The SBA guarantees 85% for loans up to $150,000, and 75% for loans greater than $150,000.
  • Loans for working capital and equipment must be repaid within 10 years, while the repayment term for real estate loans is a maximum of 25 years. 
  • The program first launched in 2011, was set to expire in March 2020, but has since been extended through September 2022.

Goals of the Community Advantage Program Loans

The CA program has a few primary goals including: 

  • Increasing access to credit and capital to small businesses in underserved communities 
  • Expanding points of access to the SBA 7(a) loan program by allowing non-traditional, mission-focused lenders to participate
  • Providing management and technical assistance as needed
  • Spurring economic growth and employment opportunities in underserved communities 

What Can You Use Community Advantage Loans For?

Small business owners can use the CA loan for many business purposes such as: 

  • Working capital 
  • Purchasing real estate
  • Purchasing inventory 
  • Renovations 
  • Equipment 
  • Debt refinancing 

CA Loans cannot be used for revolving lines of credit. 

How To Get a Community Advantage Loan

If you believe your business is a good fit for a CA loan, you’ll need to have specific documentation and information ready and go through an application process, which is detailed below. 

CA Loan Requirements

To apply for a CA loan here is the documentation and information you should have prepared: 

  • Business overview and history, including why loan is needed and how it will help the business
  • Business and personal credit score
  • Business financial statements, including profit and loss and financial projections
  • Sufficient cash flow and show ability to repay
  • Personal and business income tax returns
  • Ownerships and affiliations
  • Business certificate/license
  • Collateral and personal guarantee 
  • Resumes of the business’s management/ownership team
  • Loan application history
  • Business debt schedule identifying any loans, revolving lines of credit, credit cards, leases, and contracts

Before applying for a business loan, make sure you aren’t behind on any business and personal debt payments. 

Applying for a Community Advantage Loan

If you are ready to apply to the CA loan program, the first step is to find an appropriate lender. You can use the lender match tool to find CA lenders in your area. Many lenders begin the application process with a prequalification process that requires you to include financial statements. The approval process can take two to four weeks after your potential lender receives your documentation. 

In addition to the lender approval process, you’ll also need to complete and sign specific SBA forms. These include: 

  • Form 1919: The Borrower Information Form 
  • Form 2449: The Community Advantage Addendum, which collects information on any management or technical assistance your business has received
  • Form 413: The Personal Financial Statement, which analyzes repayment ability and creditworthiness  

Frequently Asked Questions (FAQs)

What is the minimum credit score for an SBA loan? 

Each lender typically establishes their own minimum credit scores for loans. Traditionally, SBA loans require at least a 620-640 credit score. For the CA loan, however, the SBA has designated 140 as an acceptable minimum credit score.

Are SBA loans hard to get? 

Getting approval for an SBA loan can be a lengthy process, typically taking a few weeks to a few months depending on the loan. For CA loans, though, the SBA’s portion of the application approval process can be turned around in 5-10 days. However, you’ll still need to develop a business plan, provide financial projections, and have good personal credit.