Getting Started with a Loan From The SBA

The Small Business Administration has helped thousands of small businesses get the money they need to make their busienss a success. Over 50 million in SBA loans are approved to small business each day. The SBA has several loan programs you can go through to get the money your small business needs.

Don’t forget that the SBA does not loan out money directly, you must go through a lender that works with the SBA to get this type of loan. The SBA simply backs the loan to the lending institution, if you fail to repay the loan the government will so that the lender is not assuming any risk with loaning you small business this money.

7(a) Loan Program

The SBA’s most popular loan program is the 7(a). Small businesses, like your own, are able to get up to $750,000 through a lender offering the 7(a) loan program, which is backed by a partial guarantee from the SBA. This loan program is typically used for working capital, asset purchases and leasehold improvements. Any business owners who have 20% or more in share of the business, must also use their personal guarantee to secure this type of loan.

If your lender determines that the 7(a) loan program is best for your small business, he will then begin going through different options within the program to help get the best type of SBA loan available to your business.

Lowdoc Loan

The Lowdoc loan is a great option if your business is borrowing $150,000 or less. The loan application form for a Lowdoc Loan is only one page, as this loan was created in 1993 to reduce paperwork requirements. Your businesses application is on one side of the form and the lender’s request to the SBA for the guaranty for your loan is on the other. Within 36 hours you will have a response from the SBA on approval for the Loawdoc Loan.

SBA Express

Lenders with a good SBA-lending track record take part in the the SBA express loan program. Your business can receive up to $250,000 through this program fast. Business owners can get the funds that they need for various purposes within their business within as little as 24 hours with this loan program.

7(a) Loan Program Requirements

  • small company
  • less than $7 million in tangible net worth
  • less than $2.5 million in net income
  • minimum of two to three years’ worth of financial statements
  • owner’s equity in the business

504 Loan Program

The 504 loan program was designed by the SBA for business to purchase assets, such as equipment or land. 504 loans are funded by a loan from a bank or other lending institution, along with a second loan from a certified development company (CDC) that’s funded with an SBA guarantee for up to 40 percent of the value of the asset. Typically a 504 loan is up to $1 million with contribution of 10 percent from the equity of the borrower.

504 Loan Program Requirements

  • small company
  • less than $7 million in tangible net worth
  • less than $2.5 million in net income
  • can only be used to purchase land or equipment
  • personal guarantees required

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