Small Business Loans

The U.S. Small Business Administration (SBA) helps small businesses find and get funding for loans while reducing lender risks. SBA loans make it easier for small businesses to get the funding they need:

SBA-backed loans:

1. 7(a) loan - most common loan program
2. 504 loan - long-term, fixed rate financing up to $5 million for major fixed assets
3. Microloans - smaller loans up to $50,000 through SBA funding intermediaries

7(a) loan

This is the SBA's most common loan program. It provides financial support to small business with special requirements. 

Uses:

• Best use for purchasing real estate
• Revolving funds based upon the value of existing inventory and receivables
• Short- / long-term working capital
• Refinance current business debt
• Construct new building or renovate existing structure
• Purchase equipment, office furniture, fixtures, and supplies.

$5 million is the maximum amount for this loan. 

Principle eligibility factors are based upon how the business earn income, credit history, location of operations. 

Eligibility requirements:

• For profit business
• Considered a small business, as defined by SBA
• Operate in the United States or its possessions
• Have reasonable invested equity
• Use alternative financial resources (personal assets) before seeking assistance
• Demonstrate a need for the loan
• Use the money for sound business purposes
• Not delinquent on any existing debt obligations to the US government

For more information: 7(a) loans (sba.gov) 

504 Loan

The 504 is used for major fixed assets to promote business growth and job creation. This loan is available through Certified Development Companies (CDC). 

Uses:

•  Purchase / construction
  • Existing land / building
  • New construction / facilities
  • Long-term equipment & machinery
• Improve /modernize
  • Land, utilities, drive, parking lots
  • Existing facilities

Cannot be used:

• Inventory
• Working capital
• Consolidate / refi debt
• investment in rental real estate

Eligibility requirements:

• For profit business
• Operate in the United States or its possessions
• Tangible net worth of less than $15 million
• Average net income of less than $5 million (after tax) 2 years prior to application

For more information: 504 loans (sba.gov) 

Microloan

This loan has a maximum amount of $50,000 helping small businesses / certain non-profit childcare centers startup and expand. 

Note: the average microloan amount is $13,000

Uses:

• Working capital
• Inventory
• Supplies
• Furniture
• Fixtures
• Machinery
• Equipment

Note: cannot be used to pay off debt or purchase real estate

Eligibility requirements:

• Each intermediary lender has its own lending and credit requirements. Generally, intermediaries require some type of collateral as well as the personal guarantee of the business owner. 

For more information: Microloans (sba.gov)