The American Express Company is a financial services corporation with its headquarters in the neighborhood of Battery Park City in Manhattan, New York City. American Express is also a multinational company and was founded more than a century ago in 1850.
American Express offers several business loans and aids small businesses through the Small Business Administration (SBA) loan program. Below is a thorough discussion on the SBA loan program.
11.SBA (7A)
The SBA (7a) loan program is the most common time of SBA loan, and only small businesses are eligible for this loan.
Purpose
- Loan Amount: 5000,000 dollars
- Provide long-term and short-term working capital for small businesses
- Funds are revolving and are based on the value of the inventory of the business
- Loans can be used to purchase equipment, supplies, and material
- Real estate and other properties can also be purchased with the help of this loan
- The loan can be used for construction
- The loan can be used to refinance the debt or acquire a business
- The loan can be used for business expansion
12.SBA/CDC 504 Loan Program
CDC (certified development company) and SBA provide the 504 loan program that can be used to finance fixed assets of a small business such as buildings and other properties.
Purpose
- Loan Amount: 125,000 to 10,000,000 dollars
- The loan can be used for business expansions.
- More fixed assets can also be purchased with the help of the loan
- The loan enables the business to upgrade its facilities as well.
However, it is unclear which particular SBA loan American Express offers, despite being affiliated with the program, which is why we have discussed all the SBA loans that most banks offer.
Other Small Business Loans
American Express also offers a 12-month term loan with a total value of 5000 to 2 million dollars. If the bank approves the loan, the business owner might need to sign a personal guarantee.
Types of Loans offered by American Express Bank
1. SBA (7A)
The SBA (7a) loan program is the most common time of SBA loan, and only small businesses are eligible for this loan.
2. SBA/CDC 504 Loan Program
CDC (certified development company) and SBA provide the 504 loan program that can be used to finance fixed assets of a small business such as buildings and other properties
3. Other Small Business Loans
American Express also offers a 12-month term loan with a total value of 5000 to 2 million dollars. If the bank approves the loan, the business owner might need to sign a personal guarantee. American Express will disburse the loan at once.
4. Term Loans
American Express also offers a 2-year term loan similar to the 1-year loan but offers a slightly higher starting value. The total value of the term loan is 36,000 to 2 million dollars. Again, American Express will disburse the loan at once.
5. Working Capital
Working capital is typically a business loan, and its purpose is to manage the business's cash flow. The value of the loan is 1000 to 750,000, and the terms are 1 to 3 months. To book this loan, you will first need to find a vendor and pay the American Express bank according to your contract; American Express will auto-debit the owed amount at the end of the term.
American Express Interests, Fees, and Loan Options
10.SBA (7A)
- Interest Rate: 4.25 % for < 25,000 dollars, 3.25 % for 25,0001 to 50,000 dollars, 2.25 % for > 50,0001
- Fees: 0.25 % (short-term loan) 3.5 % (1000,000 dollars)
11.SBA/CDC 504 Loan Program
- Interest Rate: 2.4 % (Ten-year term), 2.35 % (25-year term), 2.41 % (also for 25-year term)
- Fees: 0.25 % (Loan servicing) 0.5 % (SBA Guarantee)
12.Small Business Loans
- Interest Rate: 11% to 27 %
- Fees: 6% to 14%
13.Term Loans
- Interest Rate: 11% to 27 %
- Fees: 12% to 28%
14.Working Capital
- Interest Rate: Not known
- Fees: 0.5% to 1.75% (1 month), 1% to 3.5% (2 months), 1.5% to 5.25 % (3 months)
What Lending Criteria does American Express Have?
Below is the basic lending criteria that all the banks follow:
- Credit Score
- Annual Revenue
- Business Plan
- Collateral
- Time in Business
Credit Score
Credit is the most important component of all types of businesses, whether they are small or large. Lenders will always analyze the business's credit score and then decide whether it can pay the loan or not. Therefore, the best way to maintain a healthy credit score is to pay your dues on time.
Credit scores can also be easily obtained from several agencies such as Equifax, Dun & Bradstreet, and Experian. Another way of maintaining a positive credit score is to have a low debt-to-income ratio. Lenders will not invest in businesses that don't have a good credit score.
Annual Revenue
Another important factor that the lenders will review is the annual revenue of the business. Most lenders will only lend to those businesses that have been profitable for the last two years or more. Businesses need to make sure that all the financial statements are accurate and up to date.
Lenders will also look at specific details such as the current account (current assets divided by liabilities) and ask for copies of bank statements and transactions. However, businesses will only be eligible for a loan if their cash flow is growing.
Business Plan
A minority of lenders might not ask for a business plan, but most of them do, and businesses need to come with a clear and concise proposal. Usually, lenders require the business plan to know the purpose of the loan and discuss the business's stability.
One of the main components of business plans is the resumes of managers and staff. However, despite having a clear business proposal, the lenders will still ask for proof of the staff's ability and relevant credentials and experience.
Collateral
Collateral is an essential requirement, and most lenders will not provide a business loan if it cannot give collateral. Collateral can be anything like equipment or property. The collateral will also decrease the risk for the lender as it will have an asset in hand, so if the company fails to pay the loan, the collateral can be paid to fund the damages.
The owner of the company needs to provide a personal guarantee and will also need to submit some essential documents:
- Driver’s license
- Business license
- Tax returns (personal)
- Tax returns (business)
- Insurance plans of business
- Records for payroll
- Detail of owner
- Other financial obligations
Time in Business
Most banks are hesitant to lend loans to new companies that have been active for just a few months. Lenders cannot trust small businesses or startups that have just entered the market because they don't have a proper credit score and the cash flow is usually unstable. Banks will most likely lend to businesses that have been active for more than two years.
American Express Application
Following is the application procedure of all the banks that borrowers have to follow:
Before you apply for a loan, ensure that all your documentation is up to date. Also, organize all the documents properly, and if some essential documents are missing, contact the relevant authorities. Collect all the financial information about your business and pay all the dues as soon as possible.
- Personal and Business credit scores and history
- Account statements of the business
- IRS documents, tax returns of the business, and the owner as well.
- Other important financial documents such as unpaid invoices, credit card details, and accounts receivable.
- Legal contracts (leasing, franchising, incorporation)
For more information, please log onto the website of American Express. Click here.
Requirements for SBA (7a)
- Businesses should operate for 'For-Profit.'
- Business should be active only in the United States
- Significant invested equity
- Can use alternate financial resources (personal assets)
- Should be able to demonstrate loan need
- Funds should only be used for business purposes
Requirements for SBA (504)
- Businesses should operate for 'For-Profit.'
- Business should be active only in the United States
- Has a net worth of fewer than 15 million dollars and more than 5 million dollars
- Be an eligible business. Check here.
- No other sources of finances should be used other than the 504 loan
- Funds should only be used for business purposes
Summary of American Express Loan Options
American Express is not only affiliated with the SBA loan program, but it also offers other types of large and small business loans. Below we have listed all the types of loans that American Express offers:
- SBA Loans
- Small Business Loans
- Term Loans
- Working Capital
Despite offering SBA and other small business loans, there are few similarities, and all the loans are designed to cater to a specific need of the business.
American Express has also invested more than 40 million dollars in small businesses earlier this year, so the bank is trying to aid vulnerable businesses during these challenging times.Please carefully read the process of application, discuss the terms and conditions with the bank and then select the loan.
For more information regarding loans, learn more.