What is an SBA loan?
The SBA doesn’t make direct loans to businesses to start or grow a company. Instead, it provides a guarantee to banks and lenders for the money they lend to small businesses owners. This guarantee protects the lenders interests by promising to pay a portion of the loan back, if the business owner defaults on the loan. So when a business applies for an SBA loan, it is actually applying for a commercial loan through a bank or authorized SBA lender, structured according to SBA requirements with an SBA guarantee.
Essentially, SBA loans alleviate the risk associated with lending money to business owners and entrepreneurs who may not qualify for traditional loans – thus opening up lending opportunities to thousands of entrepreneurs, start-ups, growing businesses, minorities and veterans.
What types of loans are available?
There are several types of loans that business can take advantage of, each developed to suit the needs of your business. The 7(a) loan program, for example, can be used for a number of purposes including working capital, revolving funds, equipment purchases, refinance existing debt and more.
SBA also offers Export-Assistance loans as well as financing for seasonal working capital (CAPLine) or major fixed-assets such as equipment of real estate (CDC/504 loans).
In addition, SBA can help business owners in need of financing to help with disaster recovery. Disaster loans – available to homeowners, renters, businesses of all sizes and private, nonprofit organizations – can be used to repair or replace items that have been damaged or destroyed in a declared disaster including, real estate, personal property, machinery and equipment and inventory and business assets.
If you are looking for smaller loan amounts (under $50,000), consider the Microloan program or the SBA Express program. A subset of the 7(a) loan program, SBA Express is designed for businesses with financing needs up to $350,000. The proceeds can be used to finance a variety of business activities and no collateral is required for loans up to $25,000.
It’s also worth knowing that fees on all SBA loans are currently extremely favorable to veterans and are currently set at zero for loans under $150,000.
How do I apply for an SBA loan?
While each SBA loan program has its own eligibility criteria and application process (which we will work through with you), there is some advance preparation that you’ll need to undertake. From personal and business financial statements to old tax returns, this loan application checklist details what you’ll need to prepare in advance of your loan application.