The Small Business Administration (SBA) has been helping small businesses succeed for over 60 years. SBA loans and grants have played–and continue to play–important roles in achieving their mission. Except for a small loan program, the SBA does not loan money directly to small businesses, but they guarantee millions of dollars of bank loans every year.
People starting new businesses often depend on an SBA loan to fund their venture. SBA loans come in a variety of incarnations to fulfill different financing needs.
7(a) Program. The most popular program, it includes for all forms of businesses, including those that export goods, operate in agricultural or rural areas, pollution control services and other special purpose companies. Loan proceeds can be used to start new businesses, purchase existing companies or expand more mature business organizations.
SBA loans are made by commercial and savings banks approved by the Small Business Administration and come with up to 85 to 90 percent balance guarantees. In the past two decades, SBA loan offices have streamlined their reviews and approvals.
Microloan Program. SBA provides funds to intermediary non-profit, community-based lenders, along with management and technical expertise. These are smaller, short-term SBA loans, with maximum financing of $50,000. The average microloan, however, is much smaller, averaging around $13,000.
Training and management assistance are integral components of the microloan program. With interest rates typically between 8 and 13 percent, the maximum term is six years for these SBA loans. Lending and credit criteria are set by the intermediary lender, but the amount and terms of this financing is targeted to the smallest of businesses.
CDC 504 Loan Program. CDCs are Certified Development Companies. Certified and regulated by the SBA, they are created to promote community economic development. Interested businesses should easily locate a local office as there are more than 260 CDCs in the U.S.
Most 504 loans include 40 percent SBA funds and 50 percent participating lender funds. The remaining 10 percent comes from the borrower’s funds. Proceeds can be used for purchase of land and/or buildings, renovating existing buildings, furniture and equipment and related soft costs.
To apply for funding for your small business, use the form on the right to begin the application process.