The U.S. Small Business Administration (SBA) was founded in 1953. The SBA is an independent agency of the federal government whose mission is to aid and protect the interests of small business.
The SBA is not a direct lender. The SBA is a guarantor of loans made by its partner lenders, primarily banks and community development organizations. The partner lender will underwrite, qualify and administer the loan. The SBA guarantees a portion of it, so in the event that the loan is not repaid, the SBA will pay the lender back the guaranteed portion of the loan. The SBA’s role is to provide financing to small businesses that otherwise would not be able to borrow in the marketplace.
SBA loans require effort from borrowers. Okay, all loans require borrowers to put in some work, but SBA loans are particularly paper-intensive. It is not a brutal process but we definitely offer simpler, more streamlined loans. But, if you qualify for an SBA loan, rates, fees and repayment terms can be very attractive and we are available to help and guide you through the process.
The SBA offers two main loan programs for businesses – 7(a) and 504. The 7(a) program is the SBA’s most common loan program. The maximum loan amount is $5 million. There is no minimum loan size under the 7(a) program. Rates and fees are very competitive and loan terms range from a year all the way up to 25 years for loans on real estate. The SBA expects 7(a) loans to be collateralized and borrowers need to offer all available assets, both business and personal, although it is possible to qualify for a 7(a) loan with little collateral. Among other things, 7(a) loans can be used to purchase assets or for working capital.
504 loans are not available for working capital. They are purely to acquire equipment and other assets. 504 loans are available up to $5 million ($5.5 million for small manufacturing) with terms between 10 and 20 years. Rates are competitive and fees are reasonable. Since these loans are used to purchase assets, they are always collateralized.
If your business needs cash and you have time to work through the application process, let’s talk about whether or not you qualify for an SBA loan. We are here to help. If an SBA loan isn’t for you, we have a lot of other loan programs and financial products available. We are a direct investor and lender and a partner with dozens of nationwide financial services companies. Together, we can find you the best program you qualify for.