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What Different Types of SBA Loans Are There?

7(a) Loan Programs

Small businesses most often use a 7(a) loan when seeking financial assistance. This is the Small Business Administration’s (SBA) primary loan program. The interest rates for 7(a) loans are negotiated between the lender and borrower, but may not exceed the SBA maximum of 9 percent. 7(a) loan programs consist of the following:

Standard 7(a)

The maximum loan amount for this program is $5 million. The SBA guarantees 85 percent for loans up to $150,000 and 75 percent for loans greater than $150,000. Collateral is required for loans exceeding $350,000. If the fixed assets of the business are not enough to fully secure the loan, then the lender may include trading assets and use the equity available in the personal real estate of the business principals and this serves as collateral. The credit decision for this type of loan is made directly by the SBA or qualified lenders that have been granted authority to make credit decisions without the SBA’s oversight.

7(a) Small Loan

The maximum loan amount for this program is $5 million. The SBA guarantees 85 percent for loans up to $150,000 and 75 percent for loans greater than $150,000. Collateral is required for loans exceeding $350,000. If the fixed assets of the business are not enough to fully secure the loan, then the lender may include trading assets and use the equity available in the personal real estate of the business principals and this serves as collateral. The credit decision for this type of loan is made directly by the SBA or qualified lenders that have been granted authority to make credit decisions without the SBA’s oversight.

SBA Express

The maximum loan amount for an SBA Express loan is $350,000. The maximum amount guaranteed by the SBA is 50 percent. The lender can use its existing collateral policy for loans in excess of $25,000 up to $350,000. The lender makes decisions regarding eligibility and credit. Revolving lines of credit are available up to seven years with maturity extensions permitted at the outset.

Export Express

The maximum loan amount for this type of loan is $500,000. The SBA guarantees 90 percent of loans $350,000 or less and 75 percent for loans exceeding $350,000. The eligibility and credit decisions are determined by the lender. Lenders use their collateral policies that are currently in place for non-SBA loans.

Export Working Capital

This type of loan is for businesses that can generate export sales and need additional working capital to support those sales. The maximum loan amount is $5 million. The maximum SBA guarantee is 90 percent.

Veterans Advantage

The SBA states that veteran-owned businesses are the fastest growing and most significant segments of the U.S. economy. Such loans come with reduced fees. To be eligible for this loan, an individual must own and control at least 51 percent of the business and fit into one of the following groups:

CAPLines

This is an umbrella program to help small businesses meet their short-term and cyclical working capital needs. The maximum maturity on such a loan is 10 years. A person who holds at least 20 percent ownership in the business is required to guarantee the loan.

504 Loan Program

If you’re looking to expand or modernize your small business, then the 504 loan program may be for you. This loan is designed to help your business grow and allows you to purchase real estate, long-term machinery and equipment, improvements and build new facilities or upgrade existing facilities. You cannot use this loan for working capital or inventory, repaying debt or rental real estate. The maximum loan amount is determined by how the funds will be used. Loan terms vary. The loan term for land and buildings is 20 years and 10 years for machinery and equipment. Interest rates for a 504 loan cannot exceed the SBA maximum of 4.43 percent.

SBA Microloan Program

Some businesses require only a small amount of capital. Such businesses often include freelancers, online and home-based businesses. The loan amount does not exceed $50,000. The typical loan amount, however, is $13,000 . Such a loan can be used for working capital, supplies, inventory, furniture, fixtures, machinery and equipment. Repayment terms depend on the loan amount, expected use of funds, the intermediary lender’s requirements and your needs as a small business owner. The maximum repayment period is six years. Interest rates vary, but are typically between 8 and 13 percent.

Disaster Loan Assistance

The SBA offers disaster assistance loans if your business has suffered a physical or economic injury disaster. Any business within the disaster area can apply for a long-term, low-interest loan to repair or replace damaged property. A business owner can receive up to $2 million for a physical disaster loan to repair or replace damaged property. Economic injury disaster loans are available to small businesses, small agricultural cooperatives, small businesses engaged in aquaculture and most private, non-profit organizations of all sizes. Loans can be up to $2 million to cover expenses the business would have paid if the disaster had not occurred. If you do not have credit elsewhere, the interest rates for disaster loans will not exceed 4 percent. For businesses or non-profits with credit available elsewhere, as determined by the SBA, the interest rate will not exceed 8 percent. The repayment period can be up to 30 years.

Final Notes

Starting and maintaining a business can be a daunting task. It requires time, energy and persistence. If your business needs funding, there is a good chance the SBA will have a program available to help you get started. Click the button below to get a specialist to help you out and get the ball rolling.

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Last Updated Date: 2018-06-12

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