As we emerge from the past year’s challenges, many small business owners consider SBA loans to help stabilize or grow their business. Established by Congress in 1954, the Small Business Administration (SBA) supports and protects small businesses by offering various lending programs. The SBA also provides specialized assistance for minority, women and veteran business owners, helps secure financing for businesses affected by natural disasters and assists those looking to compete in international markets.
The SBA does not lend money directly but rather works with its lending partners to offer guaranteed loans to small business owners. Due to this decreased risk to lenders, the capital for SBA loans is easier to secure. Listed below are SBA loans currently available:
This loan is the best option for a small business planning to purchase real estate. The funds can also be used to refinance current business debt or purchase furniture, equipment, etc. A 7(a) loan, often referred to as the “gold standard,” offers long terms and low rates with low monthly payments—the maximum loan amount of $5 million.
Because there are fewer qualification requirements, this SBA loan has become increasingly popular with smaller startups and entrepreneurs. A microloan is a great option for a business with a limited credit history or one that only needs a maximum loan amount of $50,000. The funds can be used to repair, re-open, improve, or expand a small business. The money can also act as an emergency buffer to cover unexpected costs.
SBA Express Loan
Just as the name implies, this loan offers a quicker approval time than other SBA loans. A decision can be made within 36 hours. Generally, this loan is available to mature small businesses with owners having high credit scores.
This program was established for small businesses needing low-cost funds to update or expand. While an SBA-backed lender covers 50% of project costs, 40% of the cost is funded by CDCs (Community Development Corporations). The small business owner is typically expected to pay a cash down payment of 10% to make up the difference.
CAPLines of Credit
Insured in part by the SBA, this program offers fixed or revolving lines of credit to cover a small business’s short-term working capital needs, such as covering expenses during the CoVid shutdown.
The SBA continues to adapt its programs to support small business owners and emerging entrepreneurs as the economy rebounds from the effects of the past year.