With the help provided by the U.S. Small Business Association, you can get a loan for your business through participating lenders (mostly banks and credit unions). An SBA loan is backed by the federal government for lenders and usually has low-interest rates and relatively easy qualification standards for you. This article will shed some light on what exactly they are and how you can go about getting an SBA loan.
The SBA works in partnership with lenders to provide loans for small businesses. But the SBA isn’t exactly a lender – they make assurances of paying for the money banks, micro-lenders, community outreach organizations, and federal credit unions lend, as long as they follow guidelines the SBA sets for doing so. This reduces their risk and allows them to access capital, which in turn makes it easier for small businesses to get.
There are a few different types of SBA loans made available, and lenders can help you decide which you qualify for:
The 7(a) loan is the most common type from the SBA. It is the best option if your business needs to purchase real estate, but is also suitable for buying furniture, refinancing its current debt, and as working capital in the short or long term. Its maximum loan amount is $5 million.
To be eligible, there are some special requirements such as:
- Your business operates in the U.S. or its territories.
- You already have invested equity.
- You already use alternative resources like personal assets.
- Are not delinquent in paying other U.S. program loans.
A 504 loan is a long-term, fixed-rate financing loan up to $5 million. It aims to help promote business growth and increase job creation. They are usually available through Certified Development Companies (CDCs), which are community-based partners with the SBA to increase economic activity.
Eligibility rests on initial requirements, a few of which are:
- Your for-profit business operates in the U.S. or its territories.
- You have a net worth of under $15 million.
- Your average net income does not exceed $5 million two years before applying.
You can get an SBA microloan for your small business through an SBA funding intermediary. These are community-based nonprofit organizations with experience in lending, management, and technical assistance to small businesses. The maximum amount lent is $50,000 and it can be used for some things like:
- As working capital
- Buying furniture
Get an SBA Loan Resources
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