Frequently Asked Questions
| General | |
| Do you compete with banks? | No. Dakota Business Lending doesn’t compete with banks - we partner with them. In most cases, a bank provides part of the loan, and we provide another portion through programs like the SBA 504. This shared structure helps reduce the risk for lenders while giving small business owners lower down payments and longer repayment terms. It’s a win-win partnership that supports entrepreneurs and strengthens communities across North Dakota, South Dakota, Montana, and Minnesota! Contact Us to learn how we can work with your bank to finance your next project. |
| SBA Loan Overview | |
| What is an SBA loan? | SBA loans are programs offered by the U.S. Small Business Administration (SBA), a federal agency dedicated to helping small businesses across America. Their primary loan programs include the SBA 504 and SBA 7(a). More Info (SBA 504) | More Info (SBA 7(a)) |
| What is an SBA 504 loan? | The SBA 504 loan program offers up to $5.5M for long-term, fixed assets, such as real estate or equipment, at a fixed, below-market interest rate and lower down payment. Its goal is to promote economic development and create/retain quality jobs. More Info... |
| What is an SBA 7a loan? | The SBA 7(a) loan program provides a guarantee to the lender or bank, allowing them to finance riskier scenarios. With this program, businesses can receive up to $5M for various business needs. More Info... |
| What is an SBA 7b loan? | The SBA 7(a) loan program provides businesses with up to $5M for various business needs. A key benefit of the program is that it provides a guarantee to the lender or bank, allowing them to finance riskier scenarios. More Info... |
| What is an SBA backed loan? | SBA backed loans help lenders and financing institutions take on riskier loans because they offer a guarantee to help offset a portion of the losses in the event of a default. The SBA 7(a) loan program is a primary example. More Info.... |
| What is an SBA loan used for? | SBA loans are commonly used for business start-up, operating, and expansion costs. Types of eligible costs can include land, real estate, construction, leasehold improvements, equipment, inventory, and working capital. More Info (SBA 504) | More Info (SBA 7(a)) |
| SBA Loan Requirements and Process | |
| What credit score is needed for an SBA loan? | Credit score requirements may vary depending on specific loan programs. Generally speaking, any credit score below 650 will require additional discussion during the application process to ensure eligibility. More Info... |
| What information is needed for an SBA loan application? | While requirements may vary, standard preliminary documentation requirements include a basic project/cost overview, business tax returns, financial statements, and projections, debt schedule, personal tax returns and financial statements, and resumes of all owners. More Info... |
| What is the current interest rate on an SBA loan? | Interest rates on SBA loans vary depending on programs, lenders, and market conditions. The SBA 504 program, specifically, provides fixed, below-market interest rates. More Info... |
| What factors determine the interest rate on an SBA loan? | SBA loan interest rates are determined by a variety of factors. SBA 7(a) interest rates are based on the interest rate market, collateral, and risk, and SBA 504 interest rates are based on the treasury bond market and fees at the time. |
| What are the eligibility criteria for an SBA loan? | To qualify for an SBA loan, businesses must be a for-profit corporation, limited liability company, partnership, or proprietorship with a net worth of less than $15M and an average net income below $5M in the past 2 years. More Info... |
| What are the documents required for an SBA loan application? | The most requested preliminary documents for an SBA loan application include a basic project/cost overview, business tax returns, financial statements, and projections, debt schedule, personal tax returns and financial statements, and resumes of all owners. More Info... |
| How long does it take to get approved for an SBA loan? | Approval of an SBA loan is based on several variables and responsiveness of all parties including the business, its owners, the lender, and the SBA. More Info... |
| What is the process for obtaining an SBA loan? | The first step towards getting an SBA loan is to get in contact with your lender. They, along with any other financing parties such as a Certified Development Corporation (CDC), will work to guide you through the loan application, underwriting, approval, closing, and funding process. More Info... |
| Managing SBA Loans | |
| What is required after receiving an SBA loan? | Several components may need to be monitored after receiving an SBA loan, including updated contact information, annual income tax returns/financial statements, insurance compliance, property tax payments, and a two-year jobs creation/retention report. |
| How can I make SBA loan payments? | SBA loan payment methods vary depending on your lender, but typically are automatically withdrawn from your selected bank account each month via ACH. |
| Can I refinance an existing SBA loan? | Government guaranteed debt such as SBA 504 or SBA 7(a) are eligible through the SBA 504 Debt Refinance program, as well as other existing commercial real estate, equipment, or long-term fixed asset debt. More Info... |
| What happens if I default on an SBA loan? | If you default on an SBA loan, any collateral for the loan is liquidated with proceeds applied toward the outstanding balance. Any remaining balance is recovered through personal guarantees of the owners. |
| Are there any loan forgiveness options for SBA loans? | There are currently no loan forgiveness options for SBA loans. |
| Business Loan Options | |
| How to get a business loan from a traditional lender? | Before meeting with a lender about financing, you will need to prepare a package “Your Ask” - a package of information about your business, its financial situation, its future plans, and information about why the financing is needed. More Info... |
| How to get a small business loan from an alternative lender? | If conventional financing doesn’t fully fit your needs, you can research alternative financing options through resources such as the Vault. More Info... |
| How to get a startup business loan? | The first step towards getting a startup business loan is to contact with your lender. It is important that you understand your financial statements and projections and share this information with your lenders. More Info... |
| What are the differences between SBA loans and conventional bank loans? | SBA loans help to fill gaps where conventional financing doesn’t fully fit the need of the business. These programs can offer better terms, interest rates, down payments, and collateral requirements. More Info... |
| Is a small business loan secured or unsecured? | Business loans are typically secured to protect the lender in the event of default. |
| Improving Loan Approval Chances | |
| How can I improve my chances of getting approved for an SBA loan? | The more information and transparency you provide your CDC and lender about your needs, the better they can help you create a strong and thorough loan application package. More Info... |
| How to strengthen my business's financial profile for loan approval? | Work with an accountant to ensure that your financials are accurate and that you understand what they contain. You can also work on making sure that expenses are in line. |
| What are the common reasons for SBA loan application denials? | Ineligible projects, insufficient collateral, insufficient cash flow to support additional debt, poor credit history of the owners, and lack of down payment are the most common reasons. |
| Loan Repayment and Terms | |
| What is the average length of an SBA loan? | SBA loans offer a variety of loan terms and can be as long as 25 years. Generally, real estate loans are in the 20–25-year range, equipment loans are in the 7–10-year range, and working capital loans are in the 3–5-year range. |
| Can I prepay or pay off an SBA loan early without penalties? | All SBA 504 loans and SBA 7(a) loans with a term of 15 years or more have prepayment penalties. SBA 7(a) loans with a term of less than 15 years can be paid early without penalty. |
| What are the typical terms and conditions of an SBA loan? | SBA loan terms and conditions vary depending on loan type, collateral, lender, use of funds, and project risk. It is best to talk with your lender about your specific needs. |
| SBA 504 | |
| Who is eligible for an SBA 504 loan? | Most small to mid-sized businesses are eligible for an SBA 504 loan if they want to purchase, build, or renovate commercial real estate or buy long-term equipment. To qualify, businesses must operate for profit, have a tangible net worth under $20 million, and an average net income after taxes under $6.5 million. The SBA 504 program is designed for companies that want to grow, create jobs, and invest in their communities. Dakota Business Lending can help you determine if an SBA 504 loan fits your business goals and connect you with financing options if needed. |
| What projects can an SBA 504 loan fund? | An SBA 504 loan can fund major fixed-asset projects that promote business growth. This includes purchasing or renovating commercial real estate, constructing new facilities, acquiring large equipment or machinery, or refinance of any of these types of costs. The program can also cover land improvements such as parking lots or landscaping that support your business operations. By combining bank financing with the SBA 504 portion, business owners get access to low down payments, longer repayment terms and long-term fixed interest rates, making it easier to expand while preserving cash flow. |
| How is an SBA 504 loan structured? | An SBA 504 loan is typically structured as a three-part financing package. A bank or credit union funds 50% of the project cost, Dakota Business Lending provides up to 40% through the SBA 504 loan program, and the business owner contributes a minimum of 10% as a down payment. This partnership approach lowers the risk for lenders and provides entrepreneurs with long-term, fixed-rate financing for real estate or major equipment purchases. Our team can help structure your project to best meet your needs and for every lending partner involved. |
| What fees are associated with an SBA 504 loan? | SBA 504 loans come with a few standard fees, but most are modest and can often be rolled into the total loan amount. Common fees include an SBA guarantee fee, CDC processing and servicing fees, and typical closing costs like title insurance or recording fees. Our team is transparent about every fee and will clearly outline all fees upfront to ensure there are no surprises so you can plan confidently for your growth. The best part is that with the lower interest rate on the 504 loan, the fees basically “pay for themselves” and you save money long term! |
| Do I need to create jobs to be eligible for an SBA 504 loan? | Not always. While job creation is one of the goals of the SBA 504 loan program, businesses can also qualify by showing other forms of economic benefit or tangible ways that they will improve or strengthen the community. Dakota Business Lending can help you determine if your project meets SBA 504 eligibility through job creation or community impact. |
| Can multiple projects be combined in one SBA 504 loan? | Yes, in many cases, multiple projects can be combined into a single SBA 504 loan if they support business growth and meet SBA criteria. For example, a business might purchase new equipment while also expanding or renovating its facility. Combining projects simplifies financing, reduces closing costs, and streamlines repayment. Dakota Business Lending can customize a financing solution to meet your business’ needs and goals. |
| How does an SBA 504 loan work? | An SBA 504 loan works by pairing traditional bank financing with a long-term, fixed-rate loan backed by the U.S. Small Business Administration (SBA). Typically, a bank or credit union covers 50% of the project, Dakota Business Lending provides up to 40% through the SBA 504 program, and the business owner contributes a minimum of 10%. This structure allows entrepreneurs to access lower down payments, longer terms, and fixed interest rates. Through Dakota Business Lending, entrepreneurs across North Dakota, South Dakota, Montana, and Minnesota can use an SBA 504 loan to expand facilities, purchase equipment, and grow their business while preserving cash flow for day-to-day operations. |
| What are the different types of SBA loans? | The U.S. Small Business Administration offers several loan programs designed to meet different business needs. The SBA 7(a) is the most common and supports real estate, working capital, inventory, equipment, any business need at normal bank terms. The SBA 504 loan focuses on long-term fixed assets like real estate or machinery. SBA Microloans provide up to $50,000 for startups or smaller needs, and SBA Disaster loans help businesses recover after natural disasters or emergencies. While Dakota Business Lending provides the SBA 504 program, the team works with entrepreneurs across North Dakota, South Dakota, Minnesota, and Montana and can help determine which loan program(s) fits their goals. Contact Us today to get started. |
| What are the benefits of an SBA loan compared to traditional loans? | SBA loans offer several benefits for small business owners. They typically can help lower risks for the bank, making it easier to finance projects that they might have otherwise declined. The SBA 504 specifically features lower down payments, longer repayment terms, and fixed, below-market interest rates, making monthly payments more manageable and preserving cash flow. These features make SBA loans a strong option for business owners looking to expand, purchase property, or invest in equipment. More Info... |
| What are the drawbacks of an SBA 504 loan? | In the past, SBA loans were known to be complex, require tons of paperwork, and take a long time. Today, the process has been significantly streamlined and often closely mirrors the application requirements & timeline of the bank. Typically, a couple more forms are needed and approval can happen within a few weeks of the bank approval when a trusted and experienced lending partner like Dakota Business Lending is brought in early in the process. Many businesses find the value of the program to be significant and use it multiple times to accomplish their business growth goals. |
| Is it hard to get an SBA 504 loan? | Not when you work with experienced and trusted lenders like Dakota Business Lending. When involved early in the process, we can help determine eligibility, structure the deal, outline the documentation needs, and guide the business and bank through the process to make it as efficient as possible. Most small business owners find the process straightforward. If your business is financially sound and your project supports growth, such as purchasing real estate, expanding, or upgrading equipment, you have a strong chance of approval. |
| SBA 504 Debt Refinance | |
| What loans qualify for SBA 504 debt refinancing? | The SBA 504 Debt Refinance program allows small business owners to finance existing, qualified commercial debt originally used for fixed assets such as real estate, land, or equipment. To qualify, the business must be at least 2 years old, the debt must have been used for business purposes and be at least six months old, with a strong payment history and no significant delinquencies. The refinancing must also provide a clear economic benefit, like lowering payments or stabilizing cash flow. Contact Us to determine if your current business loan qualifies for SBA 504 refinancing. |
| Can I use SBA 504 refinance for cash-out purposes? | Yes, the SBA 504 Debt Refinance program allows cash-out in certain cases. Business owners can access a portion of the property’s appraised value as cash for eligible expenses such as payroll, inventory, or debt consolidation to be used in the next 18 months. The cash-out portion must directly support business operations and can’t be used for dividends, personal use, or investment purposes. This option helps businesses strengthen cash flow and reinvest in growth. Contact Us to explore whether cash-out refinancing can help your business. |
| How does refinancing differ from a new SBA 504 loan? | An SBA 504 debt refinance is used to restructure existing commercial loans, while a new SBA 504 loan funds new projects like property purchases, construction, or equipment. Both share the same three-part structure - bank financing, a CDC/504 portion, and a borrower injection – but refinancing focuses on improving terms, reducing rates, and freeing up working capital. It’s about making what you already own work better for your business! Dakota Business Lending can help you decide which option best fits your situation. |
| Are there limits on existing debt age for refinancing? | Yes. To qualify for SBA 504 debt refinancing, the existing loan must be at least six months old and originally used to acquire, improve, or refinance fixed business assets such as real estate or equipment. The borrower must have also made all required payments on time for the past 12 months. These rules ensure the debt is stable and that refinancing provides genuine economic benefit. Our team can review your loan history to see if it meets SBA 504 refinance eligibility requirements. |
| How does refinancing affect payments and interest rates? | Refinancing through the SBA 504 program often lowers monthly payments by extending repayments terms (up to 25 years for real estate!) and locking in fixed, below-market interest rates for the remaining life of the loan. This can significantly improve cash flow and reduce financial stress for small business owners. The new rate and term depend on project size, collateral, and market conditions, but most borrowers benefit from predictable payments and better stability. Dakota Business Lending can help you compare your current loan with SBA 504 refinancing options to see the potential savings. |
| Can I refinance multiple loans with one SBA 504 debt refinance? | Yes, multiple existing loans can often be consolidated into one SBA 504 debt refinance, as long as they were originally used to purchase, improve, or refinance fixed assets such as real estate and equipment. Combining loans simplifies repayment, can lower total monthly payments, and helps business owners manage debt more efficiently. All loans included must meet SBA eligibility criteria and show a history of timely payments. Dakota Business Lending can help review your loans to see if consolidation through the SBA 504 Debt Refinance program makes sense for your business. |
| How does the SBA 504 Debt Refinance program work? | The SBA 504 Debt Refinance program allows small business owners to replace existing commercial debt with a new SBA 504 loan that offers long-term, fixed-rate financing. The structure is similar to a standard SBA 504 loan which includes bank financing, a CDC/504 portion, and a borrower injection. This set up often reduces monthly payments, stabilizes interest rates, and improves cash flow. More Info... |
| New Markets Tax Credits | |
| What is NMTC? | The New Markets Tax Credit (NMTC) program is a federal incentive designed to encourage investment in low-income or distressed areas. It allows investors to receive a tax credit in exchange for funding projects that spur economic development, create jobs, and revitalize distressed areas. NMTC financing is often used by businesses, non-profits, and real estate developers to access low-cost capital that might not qualify for traditional loans. Visit our webpage to learn more. |
| What projects qualify for NMTC? | Projects eligible for NMTC financing are typically located in designated low-income or distressed census tract areas and promote economic development. Common projects include commercial real estate development, community facilities, manufacturing expansions, healthcare centers, and other initiatives that create jobs and benefit local residents, and must be large scale projects (greater than $7.5MM). Both for-profit and non-profit projects may qualify, as long as they meet the program’s community impact and location requirements. More Info... |
| What are the benefits of NMTC financing? | NMTC financing offers several advantages, including access to below-market capital, reduced interest rates, and potential equity investment opportunities. These loans can convert to equity at the end of the compliance period. It can otherwise make difficult projects financially viable while supporting economic growth in underserved communities. Businesses and developers can benefit from improved cash flow and long-term stability while contributing to community revitalization. More Info... |
| Can NMTC be combined with other financing programs? | Yes, New Markets Tax Credit (NMTC) financing be combined with other public and private funding sources, including SBA loans, bank loans, and state or local incentives. Combining programs can lower overall financing costs, increase project size, and improve cash flow. However, each project must meet NMTC rules including location and community impact requirements. Check out Superior Wall of North Dakota’s success story of utilizing NMTC, SBA 504, and Direct Business Loan financing with Dakota Business Lending. |
| What reporting is required for NMTC projects? | Projects funded with NMTC financing must comply with reporting and compliance requirements. This typically includes tracking job creation, project completion milestones, and community impact metrics. Borrowers also must submit annual reports to ensure continued eligibility and adherence to NMTC regulations. Dakota Business Lending works closely with borrowers to manage requirements and maintain compliance throughout the life of the project. |
| Who is eligible for NMTC financing? | Eligibility for NMTC financing generally includes businesses, non-profits, and developers with projects located in qualified low-income communities. The project must demonstrate clear economic or community benefits, such as job creation or neighborhood revitalization. Investors and lenders also consider financial stability and project viability. Dakota Business Lending can guide you through eligibility requirements to see if your project qualifies. |
| How do I apply for NMTC financing? | Applying for NMTC financing involves submitting a detailed project proposal that outlines location, community impact, financial projections, and compliance with program requirements. Because NMTC is a highly competitive program, the project pipeline is continuously revised and reprioritized based on demand, estimated impact, and NMTC allocation available. It is best to reach out to our team early to ensure your project is considered for potential NMTC support. |
| What is the interest rate on a NMTC loan? | Interest rates for NMTC loans are typically below market rates, making financing more affordable for projects in low-income communities. The exact rate depends on project size, structure, investor participation, and market conditions. NMTC financing often combines debt and equity to maximize capital efficiency. Contact Us to get a personalized estimate for your NMTC project. |
| How long does it take to get approved for a NMTC loan? | Approval for NMTC financing can take several months due to the competitive application process, investor review, and compliance requirements. Typical timelines range from 3–9 months, depending on project complexity, location, and readiness. Dakota Business Lending works closely with applicants to streamline the process and ensure all necessary documentation is complete for faster consideration. |
| Direct Business Loan (DBL) Program | |
| What is the DBL program? | The Direct Business Loan (DBL) program was created by Dakota Business Lending as a flexible small business financing solution designed to help entrepreneurs access capital and fill the gap where other financial programs cannot. The DBL program provides loans to businesses across North Dakota, South Dakota, Montana, and Minnesota, supporting entrepreneurs in all stages of business. The program aims to strengthen local businesses by providing accessible, customized financing options and helping them along their Path to Bankability. More Info... |
| Who is eligible for a DBL? | Eligibility for Direct Business Loans depends on business type, credit history, and project purpose. Both startups and established companies may qualify, depending on project feasibility and financial stability. Dakota Business Lending can help you determine if your business meets the Direct Business Loan program requirements. |
| What can DBLs fund? | Direct Business Loans can fund a variety of business needs, including inventory, working capital, equipment, and more. The program is designed to support businesses of all stages and help fill the gap where traditional financing options cannot. More Info... |
| How are DBLs different from SBA loans? | Unlike SBA loans, Direct Business Loans are administered directly through Dakota Business Lending and may offer more flexible underwriting, faster approvals, and customized terms tailored to your business. While SBA loans often have stricter eligibility requirements, DBLs focus on bridging the gap where other financing programs cannot and supporting businesses in all stages of growth. DBLs can be administered in partnership with lending institutions to complement SBA or traditional loans as part of a full financing package, or independently directly to borrowers. |
| What is the approval timeline for DBLs? | Approval timelines for Direct Business Loans are generally faster than federal loan programs. While the exact timeline depends on project complexity and documentation, most businesses can expect a decision within a few weeks. Dakota Business Lending works closely with applicants to streamline the process and ensure all requirements are met efficiently. |
| Can DBLs be used with other financing? | Yes, Direct Business Loans can often be combined with other financing sources, including SBA loans, bank loans, or state and local incentives. Combining programs can help reduce borrowing costs, improve cash flow, and fund larger projects. Dakota Business Lending can help structure a custom financing package that meets your business goals. |
| Are collateral requirements needed for DBLs? | Collateral may be required depending on the size of the loan and the type of project being financed. Typical collateral includes business assets like equipment, real estate, or accounts receivable. Dakota Business Lending evaluates each project individually to balance risk with the borrower’s needs, often providing more flexible options than traditional lenders. |
| How do I apply for a DBL? | Applying for a Direct Business Loan involves submitting a loan application that includes business information, financial statements, and details about the project or funding purpose. Dakota Business Lending reviews applications, works with you to meet program requirements, and guides you through the approval process. Contact Us to start your application today. |
| What is the interest rate on a DBL? | Interest rates for Direct Business Loans vary based on project size, risk profile, and repayment term. They are generally competitive and structured to provide manageable monthly payments for small business owners. Dakota Business Lending can provide a personalized rate estimate and help compare options to ensure the loan fits your budget and business plan. |
