The Small Business Administration (SBA) offers several different types of loans. If you meet the SBA’s requirements and are looking for financing, this guide will help you determine which type is best for you.
The 7(a) Loan Program.
The 7(a) Loan Program is the most common type of SBA loan. It’s available for new and established small businesses with annual revenues between $0 and $150 million. The credit limit is up to $5 million, but higher limits can also be as high as $50 million. The 7(a) program offers committed loans and revolving lines of credit used for business purposes such as purchasing fixed assets like machinery or equipment—or even real estate in some cases.
The 504 Loan Program.
The 504 Loan Program provides long-term financing to businesses for fixed asset acquisition and the costs of construction, enlargement, renovation, conversion and improvement. The 504 Loan Program requires a lower down payment than other SBA loans terms.
The loan amount can be up to $5 million, with a minimum of $100,000 per project and no upper limit on the number of projects that may be financed. The borrower’s equity contribution must be at least 15% of total project costs; however, it cannot exceed 50%.
“The SBA itself does not lend money directly but does help reduce risk to lending partners. With these types of loans, small business owners usually enjoy competitive rates and SBA loan terms, counseling, and education opportunities,” explains Lantern by SoFi experts.
Microloans.
Microloans are for small business owners with a minimal annual income. Microloans are typically used for purchasing equipment, supplies or inventory and can is used to cover the costs of starting or expanding a business. These loans are usually relatively short-term, with terms up to 36 months.
Interest rates on microloans tend to be higher than other types of loans because they’re considered riskier investments. After all, your company’s net profits may be too low for traditional lenders. If you’re considering applying for a microloan, consider working with a nonprofit organization instead of an online lender. These organizations have been in business longer and have more experience helping small businesses succeed.
CAPLines Loan Program.
CAPLines are a type of loan offered by the SBA. They are for small businesses that need working capital to finance inventory, supplies and accounts receivable. The loans can be used to purchase new or used equipment or machinery, land or buildings, and intangible assets such as patents and leases on real estate.
CAPLines can be used to:
- Finance inventory
- Finance supplies
- Finance inventories and accounts receivable
Export Loans.
Export loans are available to exporters and can be used to finance the purchase of goods from the United States or to finance the export of goods from the United States to foreign countries.
This type of loan is available through direct and indirect lenders. Direct lenders include SBA-approved lending partners like banks, credit unions, community development financial institutions (CDFIs), cooperative lenders, etc. Indirect lenders include non-bank businesses such as large retailers (Walmart) or manufacturers that partner with small businesses to offer financing options over time.
The SBA is an excellent resource for small businesses looking to grow. The program has many different loan options, each with its benefits and drawbacks. If you are considering applying for a loan through the SBA, you must understand all the details before deciding which type will work best for your business needs.
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