SBA Loan Program

The Small Business Administration (SBA) was established in 1953 and offers a number of tools to help small business owners, including their loan guarantee program. It’s not the biggest source of small business financing out there, but the SBA definitely sets a tone that influences how participating financial institutions look at small businesses. The SBA offers a number of different loan types to small business owners, including:

1. 7(a) Loan Program: Intended to help businesses financially and is the most popular SBA loan. Proceeds from a 7(a) loan may be used for working capital, to purchase equipment, real estate, new building construction, renovation or expansion, start a new business or purchase an existing business, to name a few. Loan proceeds may not be used to pay off an existing business loan, buy out a partner, pay delinquent state or federal withholding taxes, or anything else that wouldn’t be considered a sound business purpose as determined by the SBA. In October of 2013, the SBA removed fees on any 7(a) loan of $150,000 or less, potentially making it more attractive for member banks to loan in those smaller loan amounts.
2. CDC 504 Loan Program: A CDC (Certified Development Company) 504 loan is designed to provide long-term financing for major assets like property and buildings. CDCs have been established across the county to help develop local communities. The loans are designed to help small business owners in a position to create local jobs. CDC loans are 100 percent guaranteed by the SBA and can be used to purchase property, buildings, make improvements, construct new facilities, or purchase equipment or machinery. Unlike a 7(a) loan, a CDC 504 loan may not be used for working capital. It is also not intended for real estate speculation or investing in rental real estate.
3. Microloan Program: Very small loans of $50,000 or less are available to nonprofits for working capital, inventory or supplies, furniture or fixtures, and machinery and equipment. Many of the same restrictions apply as mentioned above.
4. Other Loan Types: There are other loan types available for specific needs like, Disaster Loans, Export Assistance Loans, Veteran and Military Community Loans, and the Patriot Express loan program designed to help eligible veterans build and expand their businesses.

To learn more about the SBA loan guarantee program, check out SBA.gov. The website outlines what it takes to qualify for an SBA loan, a checklist of information you’ll need to apply, and more detail about what is an acceptable loan purpose and what is not.

You can read more about traditional financing HERE.

Click HERE to learn about factoring your AR.

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