SmartBiz Small Business Loan Review

About SmartBiz

SmartBiz

SmartBiz is the #1 online provider of SBA loans $350,000 and under. SmartBiz leverages advanced technology to dramatically speed up the SBA loan process. By answering just a few questions, small business owners can pre-qualify for a loan in about 5 minutes and get funds as fast as 7 days after the application is completed. SBA loans are the best deal going in the marketplace with low rates and no prepayment penalties. As a result of the 10 year term, monthly payments are very low. SmartBiz makes SBA loans easy.

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What is SmartBiz?

Smartbiz was founded in 2009 in response to the financial crisis and resulting small business credit crunch. The goal behind the San Francisco-based company was to build a technology platform that streamlined the lending process and made it easier for banks to offer loans guaranteed by the U.S. Small Business Administration.

The company is not a direct lender, but partners with banks to facilitate the origination of SBA-guaranteed loans. SmartBiz claims approximately 90% of loans it refers to bank partners are funded. In 2016, the company facilitated more SBA 7(a) loans under $350,000 than any other lender, including major banks like Wells Fargo.

SmartBiz is funded by venture capitalists including Investor Growth Capital, Venrock, First Round Capital, Baseline Ventures, and SoftTech VC.


SmartBiz highlights

SmartBiz Loans is an online marketplace for SBA-backed loans. SmartBiz and the banks it works with participate in the 7(a) business loan program, the most popular SBA lending program. The company’s technology streamlines the SBA loan application process and matches small businesses with the SBA-preferred banks most likely to approve their application. SBA loans often carry lower interest rates and longer terms than other options for business financing.

There are some drawbacks, including stiff underwriting standards and extensive documentation requirements. While SmartBiz Loans’ technology can help you determine your eligibility for an SBA loan quickly, it doesn’t hasten the time to funding such loans largely because of the federal paperwork requirements.


What SmartBiz offers?

SmartBiz and its bank partners offer SBA-guaranteed loans for commercial real estate purchasing and refinancing, working capital and debt consolidation. These loans are longer term, from 10 to 25 years, resulting in lower payments than shorter-term options.

SBA loans also carry lower interest than many other options. The company estimates APR including interest rate and fees of 6.25% to 8.50%, depending on the loan type and amount and which bank that finances it. The SBA limits interest rates to the prime rate plus 1.50% to 2.75% for commercial real estate loans from $500,000 to $5 million. For working capital or debt consolidation loans, the limit is prime plus 2.75% to 3.75%.

Commercial Real Estate SBA 7(a) Loan

  • Loan amount: $500,000-$5 million
  • Loan term: 25 years
  • APR range/factor rate: 6.25% to 7.50% (variable, prime plus 1.50% to 2.75%)
  • Fees: SmartBiz charges a referral fee up to 0.5% and a packaging fee of up to 0.5%. The SBA charges a guarantee fee between 3% and 3.75% based on the loan amount. Bank closing costs typically add $5,000.
  • Time to funding: Can fund within 7 days of application completion. But typically takes 4-6 weeks.

Working capital/debt consolidation SBA 7(a) loan

  • Loan amount: $30,000 to $5,000,000
  • Loan term: 10 years
  • APR range/factor rate: 6.25% to 8.50%. (Prime Rate plus 2.75% to 3.75%).
  • Fees: SmartBiz charges a one-time referral fee of no more than 2%. The SBA charges a guarantee fee. For loans of $125,000-$150,000, the SBA fee is 2.7% of the guaranteed portion or 1.7% of the loan balance. For loans of $150,001-$700,000, fee is 2% of the guaranteed portion or 1.7% of the loan balance. For loans of $1 million to $5 million, fee is 3.5% for the guaranteed portion up to $1 million and 3.75% for the guaranteed portion over $1 million. Bank closing costs typically add $450.
  • Time to funding: Can take as little as 7 days after completing application. But for loans of more than $150,000, typically takes 4-6 weeks.

Rates current as of 06/14/2018


Eligibility requirements

Loan product Annual revenue Min. business credit score or personal credit score Time in business
Commercial property SBA 7(a) loan SmartBiz does not specify other than to say sufficient business and personal cash flow to service all debt payments, demonstrated by three years of tax returns and interim financial data. Business owners must have a personal FICO credit score above 675. More than two years.
Working capital/debt consolidation SBA 7(a) loan Sufficient business and personal cash flow to service all debt payments, demonstrated by three years of tax returns and interim financial data. Business owners must have a personal FICO credit score above 650. More than two years.

 

Additional eligibility factors

SmartBiz SBA loans have a number of additional eligibility requirements. For commercial real estate loans, those additional requirements include:

To apply, the borrower should have the following handy:

  • A business owner who owns more than 20% of the business must provide a personal guarantee, an unsecured promise in writing to cover payment if the business fails to repay the loan.
  • The property must be 51% owner occupied.
  • Business owners must be U.S. citizens or legal permanent residents.
  • No bankruptcies or foreclosures within the past three years, and no outstanding collections or open tax liens.
  • No delinquencies or default on government loans.
  • You must put 10%-20% down, or have 10%-20% equity in the property.

For working capital and debt consolidation loans, requirements include:

  • All business owners who own more than 20% of the business must provide personal guarantees.
  • Business owners must be U.S. citizens or legal permanent residents.
  • No bankruptcies or foreclosures within the past three years, and no outstanding collections or open tax liens.
  • No delinquencies or default on government loans.
Businesses that are not eligible for SmartBiz SBA loans
Gambling Mining
Lending Mortgage servicing
Multi-level marketing Real estate development
Life insurance Bail bonds
Speculative firms such as oil wildcatting Pawn shops
Lobbying Private clubs
Nonprofits Religious organizations

How to apply for SmartBiz financing

For a commercial property SBA loan:

  • Provide basic financial information online to pre-qualify. SmartBiz can let you know if you pre-qualify within five minutes.
  • Provide financial information about yourself and any other owners.
  • You will then receive a non-binding letter of intent with details about the loan, allowing you to negotiate with the seller of the property.
  • The property will then have a valuation placed upon it.
  • Upload all requested documents to complete the application.

For a working capital or debt refinance loan, the same steps apply, but without the letter of intent or property valuation.

Documents to apply for working capital, debt refinance and commercial property loans:

  • The previous three years of personal and business tax returns.
  • A personal financial statement from each person owning more than 20 % of the business.
  • A profit and loss statement measuring the company’s financial performance.
  • A balance sheet showing an overall financial snapshot of your business.
  • Entity and location documents such as business licenses, articles of incorporation, commercial leases or franchise agreements.

Pros/cons

Pros Cons
Lower rates. Personal guarantees required.
Long terms. Tough underwriting requirements.
Lower monthly payments than other options. Application process can be extensive, though SmartBiz makes it easier than going through it one bank at a time.

Who is the best fit?

Established businesses with strong balance sheets and owners who have solid credit histories are most likely to be successful with this process. Typical businesses approved for SBA loans through SmartBiz have $50,000 to $5 million in annual revenue and are profitable.


Fine print

The process is straightforward for SBA loans through SmartBiz. One key note: Your rates could vary depending on which bank partner winds up funding your loan.


The bottom line: How SmartBiz stacks up

SmartBiz has largely done what it set out to do by providing a smooth online platform for matching borrowers with lenders who offer SBA loans. That doesn’t mean it’s for every small business, though. If you’re still pushing toward profitability, have somewhat shaky credit or haven’t been in business long, this product probably isn’t for you. However, the company offers advice for getting your business to the level of qualifying.

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