SBA Community Advantage Loan: What It Is & How to Apply

This article is part of a larger series on Business Financing.

1. 1 How It Works
2. 2 Rates, Terms & Qualifications
3. 3 Who Should Consider It
4. 4 Pros & Cons
5. 5 How to Apply
6. 6 Alternatives
7. 7 Bottom Line

The SBA Community Advantage Pilot Program officially ended on October 31, 2023 [1] . For similar loan programs, you can reference the following related resources:

• SBA Loans: Types, Rates & Requirements
• SBA 7(a) Loans: Rates, Requirements & Terms
• SBA 504 Loan: What It Is & How It Works
• SBA Disaster Loans: Everything You Need to Know
• SBA Microloans: Rates, Eligibility & How to Apply

Details regarding the former program are below.

The Small Business Administration (SBA) Community Advantage loan program offers funding to businesses in underserved markets, such as startups, veterans, and minority entrepreneurs. You can get up to $350,000 in funding and, like other loans backed by the SBA, this loan can offer some of the most competitive rates available. SBA Community Advantage loan requirements are also designed to be easier and faster to get than other types of SBA loans.

With an SBA Community Advantage loan, up to 85% of the loan is guaranteed by the government. For lenders, this means they stand to lose far less even if a borrower defaults. As a result, these loans represent a much lower risk, which is reflected in the low interest rates that are offered on SBA loans.

Community Advantage loans are geared towards helping businesses in underserved areas, and lenders must meet certain criteria to offer this type of loan. This includes maintaining at least 60% of their SBA loan portfolio in underserved communities, defined as follows:

• Low-to-moderate income (LMI) communities;
• Empowerment zones and enterprise communities;
• Historically underutilized business zones;
• Promise zones;
• Opportunity zones;
• Rural areas;
• Startup businesses in operation for less than two years;
• Businesses that are majority owned by one or more veterans;
• Businesses where more than half the full-time workforce resides in an LMI zone

• Prime + 6.5% for loans $50,000 or less
• Prime + 6% for loans between $50,000 and $250,000
• Prime + 4.5% for loans between $250,000 and $350,000

• 10 years for working capital
• 25 years for real estate

• SBA guarantee fee: $0–3.75%
• Third-party fees: Varies, but typically up to $2,500

• Personal credit: Varies by lender; 680+ recommended
• Business credit: Varies by lender; 160+ recommended

Rates & Terms

When it comes to certain rates and fees, the SBA sets limits on what lenders are allowed to charge. Rates can fluctuate based on the current US prime rate, and you can learn more about what that is and how often it changes in our guide on the prime rate.

Just like rates, some SBA loan fees are also subject to maximums. Fees can include packaging fees and servicing fees. It can also cover third-party fees such as title, appraisal, attorney, and environmental report fees. Our article on SBA 7(a) loans contains more information about potential fees.

Qualifications

To get an SBA Community Advantage loan, you’ll need to meet eligibility requirements in several categories. There are general qualification requirements that apply to all SBA loans, items specific to the Community Advantage program, and additional requirements that may apply to your specific Community Advantage lender.

We detail the requirements for each of these sections in our overview of SBA loan requirements.

• You work in an underserved area: The Community Advantage loan was designed to provide financing to those in underserved communities. The SBA considers startups to meet this definition, in addition to women, veteran, and minority-owned businesses. However, this is not an all-inclusive list as the SBA lender you choose will make the final eligibility determination.
• You have been unable to get financing from other lenders: SBA loans are not designed to be a first option of funding. As a result, you’ll need to be able to show that you’ve been unable to secure the financing terms you want before being approved for an SBA loan.
• You need funds for business-related expenses: Loan proceeds from a Community Advantage loan can be used for a wide variety of business expenses. This can include purchasing real estate and equipment. It can also be used as working capital to cover daily expenses such as rent, payroll, and other operational costs.
• You are looking for business counseling: Depending on the SBA lender you choose, you could be offered additional business resources such as counseling. You may also receive assistance with things like financial projections and competitive analyses.

Getting an SBA Community Advantage Loan consists of the following steps.

• Step 1: Understand your loan options and ensure this is the right type of loan.
• Step 2: Consider your qualifications and eligibility.
• Step 3: Find an SBA lender.
• Step 4: Provide the required documents to get approved.

Community Advantage loans are part of the larger SBA 7(a) program, and you can see details on each of these steps in our guide on SBA 7(a) loans.

Finding a lender may be challenging depending on where you’re located, as SBA-approved lenders must meet additional criteria to be eligible to offer a Community Advantage loan. You can use the SBA’s lender match tool to connect with a local lender offering the funding you need.

While this type of loan is designed to be quicker and easier to get than other types of SBA loans, we still recommend gathering the following items that most lenders will require. Doing so can help avoid potential delays.

• Personal and business financial statements: Commonly requested items include a profit and loss statement, cash flow statements, business bank account statements, and balance sheets.
• Personal and business tax returns: Tax returns for the past two to three years may be requested. You should include all pages, including applicable schedules, K-1 statements, and worksheets.
• Business licenses and certifications: If applicable, you may need to provide copies of your licenses and certifications as evidence that you can legally conduct business in your industry.
• SBA Form 1919: One of several SBA forms you’ll be required to complete is the borrower information form. This provides lenders with a description of your business and ownership interests.
• SBA Form 2449: This is the Community Advantage addendum, and must be completed to show the type of assistance and counseling your business has received in the past.

An SBA Community Advantage loan won’t be right for everyone. If you are unable to find a lender that offers this program for your state or are having difficulty getting approved, you can also consider some of the following alternatives that may be easier to get:

• Other SBA loans: Different types of SBA loans, such as 7(a) and 504 loans, can have varying qualification requirements, rates, and terms. Learn more about which program could be a better fit for you in our article covering different types of SBA loans.
• Working capital loans: These short-term loans offer funding for almost any type of business expense such as payroll, rent, and other daily operational costs. Loans can come in several different forms, including term loans, lines of credit, and cash advances. You can see our roundup of the top working capital loans to find one suited to your needs.
• Equipment financing: If you need business-related equipment, this type of financing can sometimes offer lower rates and easier qualification requirements. You can choose an equipment lease if you don’t intend to keep the equipment long-term or an equipment loan if you want to retain ownership once the repayment term has ended. View our picks of the leading equipment financing companies.
• Commercial real estate (CRE) loans: A CRE loan can be used to buy, renovate, or build commercial property. Qualifying property types often include warehouses, office spaces, and retail stores. We’ve compiled a list of the best commercial real estate loans to help you find the right lender for this type of financing.
• Rollover for business startups (ROBS): A ROBS is not a loan but is a way for you to access your retirement accounts tax- and penalty-free. This is a complex transaction with hefty penalties if done incorrectly, so we recommend using the services of one of our top-recommended ROBS providers.
• Personal loan for business purposes: If you’re unable to get approved due to an issue with your business credit or finances, a personal loan can be an option to get the funding you need. Personal loans place a greater emphasis on your personal credit scores. Head over to our guide to see the best personal loans for business funding.

Check out our tips on how to get a small business loan to improve your odds of getting approved.

SBA Community Advantage loans can be a good option for business owners in underserved communities. However, you should also consider some of the alternative funding options we’ve mentioned, as the current SBA Community Advantage loan program is set to expire on September 30, 2023.