What is an SBA Loan?
The SBA Loan programs were created to make sure America’s small businesses have access to the capital they need to thrive. There are several different SBA Loan programs targeted to specific needs. Loan amounts are based on industry, need, and repayment ability.
The 7(a) loan program is the most popular. The 7(a) loans can be used for Real estate, working capital, equipment, inventory, and acquisition among other things.
The SBA 504 program is used primarily for real estate and large equipment purchases. It offers down payments as low as 10% and fully amortized fixed rate loans for up to 20 years.
The SBA also has a variety of other loan programs including Micro-loans, SBA Express loans, Disaster loans, and other specialty loan programs.
A word of warning – SBA loans require a personal guarantee and there are limits to how much a person can guarantee so be careful. When talking to some bankers this will be referred to as SBA money as in ‘do you have any SBA money left?’ What this means is that you could guarantee several different SBA loans up to your SBA maximum. For example, you may have used the 504 program to purchase your new building and then used a 7(a) loan for some working capital and inventory as you grew. It is important to discuss your business with your lender to make sure that your loan structure is optimal for your future. For example, if you used a 7(a) loan to acquire your building instead of a 504 loan, it is possible that you do not have enough eligibility left to get the working capital and inventory loans.
Do you have questions about getting a 7a or 504 loan?
