Finding an SBA Loan for Your Small Business

If your business is in need of financial assistance SBA loans may be one option to consider looking into. These loans are designed to meet small business needs and are guaranteed by the Small Business Administration. The right loan type for your needs will depend on your company type and what you intend to do with the funding. Keep reading to learn a little bit more about the types of loans the SBA guarantees, and which may be the right choice for your company.

7(m) SBA Microloans

The 7(m) microloan is short-term and designed for small businesses and nonprofit child care centers. These are offered in amounts up to $35,000 and can be used for supplies, furniture, equipment, and working capital. They cannot be used for real estate or debt.

Basic 7(a) Loans

Of all the SBA loans available the basic 7(a) loan is probably the best known. This is perhaps the most flexible type of loan offered as the funds it provides can be used for a variety of business needs. These can include office furniture or fixtures, purchasing or fixing equipment, working capital, building improvements, and acquiring land or buildings. Under some conditions the lender may even allow the loan to be used to refinance debt.

Qualifying for this type of loan requires that the company operates for profit, the owner has invested some of their own equity in the business, the business operates in the U.S., and that alternative sources of funding have been considered. Most small businesses are eligible if these conditions have been met.

504 SBA Loans

The 504 loan type is designed to help with expansion and modernization. The funds provided by these loans can be used for real estate, equipment and machinery. The main portion of the loan is provided by a private leader in an amount of approximately 50 percent with a Certified Development Company (CDC) putting up around 40 percent. The remaining ten percent is comprised of equity belonging to the borrower.

These loans are available to small businesses with a net worth under $7.5 million, with an average after tax income under $2.5 million. These loans cannot be used for investment purposes.

Choosing the right option for your company from the SBA loans available depends largely on your company’s needs and how the funding will be used. Micro loans are small and short term. The most flexible of the loan types is the 7(a) loan as it can be used to meet a variety of needs. 504 loans are designed to help businesses with modernization and expansion needs.

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