SBA loans
Small businesses form the heart and soul of the American dream. When just starting out, many entrepreneurs do not know where to turn to finance their vision. SBA loans can help a small business begin its journey by acquiring real estate, equipment and working capital.
What are SBA Loans?
The Small Business Administration (SBA) is a government agency with the mission of helping out small businesses. Through an SBA loan, the administration acts as a co-signer to the loan. This nearly always guarantees that the business will qualify for the loan. So long as your business can qualify for assistance from the SBA, you can count on securing financing through an SBA loan. In addition to securing loans, the SBA also regulates the interest rates on these loans. This helps businesses establish a reasonable credit score without drowning in interest payments. Many small businesses apply for either the SBA 504 or SBA 7(a) loan through the administration. Each has its own intended use which your business must adhere to in order to retain financing.
You can use an SBA 504 loan to cover the purchase of real estate, equipment and construction. These help small businesses at the beginning of their journey or when they attempt to expand a little bit. SBA 504s are serviced through a local Certified Development Company. The SBA authorizes these companies to handle SBA 504 loans. A small business must put down at least 10 percent of the desired loan amount. The rest of the funding comes from the SBA and a private lender, each providing 40 percent and 50 percent of the loan respectively. SBA 7(a) loans have a lot more flexibility. You can use them just like you would a SBA 504, while also using them as working capital. Private lenders provide them and the SBA backs them.
INCOME
The SBA determines eligibility for their loans based on assets and income. Businesses with more than $15 million in assets and $5 million in net annual income will not qualify.
TYPE
To qualify as a small business, you must meet the SBA’s requirements in your specific industry.
RESOURCES
SBA loans are not just freely given. The administration requires that applicants use other funding sources before going for an SBA loan. This includes using personal assets first.
SBA Loans
Have big advantages
- Receive 90 percent of project funding
- Tailored to small businesses
- SBA sets interest rate limits
- No balloon payments
FAQs
When to Avoid SBA Loans?
Your business must qualify as a small business in the eyes of the SBA. Also, nonprofit organizations will not qualify for SBA loans.
Is there a Limit to How Much I Can Borrow?
SBA loans typically have a limit of $5 million. This means that larger projects require different avenues of funding. The SBA does not intend their loans to handle extensive projects. In rare instances, the SBA may bump up the funding limit to $5.5 million depending on the project. Still, you would have to thoroughly explain the need for a higher limit. Our loan brokers can help you find a loan for a larger amount when looking to finance expensive projects.
Are there Other SBA Loans?
In addition to the 504 and 7(a), the SBA also provides several other loan options. One of our experts can go over all types of loans you may qualify for from the Small Business Administration.
What Financing Fits You?