How SBA Loans Work:
The Small Business Administration (SBA) provides numerous financing options to business owners nationwide. Many people don’t realize that the SBA doesn’t directly loan money to businesses; they work with banks to guarantee loans in case the business defaults. Then, these traditional banks loan money to the business as an SBA loan.
If you’re interested in SBA loans, keep reading to find out if you meet their qualifications.
SBA Loan Requirements:
- Use funds for business-related uses.
- Have a decent amount of business equity.
- Be an officially registered, for-profit business that’s based in the U.S.
- Have no past-due payments on federal government loans.
- Typically, you’ll need a credit score above 620.
SBA 7(a) loan:
This is the most popular SBA product. It provides flexibility to small business owners looking for up to $5 million in additional working capital. It can be used for real estate, refinancing existing debt, purchasing equipment, among other common uses. To qualify for this SBA loan, you’ll need to be a U.S. based, for-profit business.
SBA 504 loan:
The SBA 504 loan is typically more challenging to qualify for than the 7(a) loan, but they usually have fewer fees than other SBA financing options. Also, no additional collateral is required to qualify. You can use this SBA loan for startup costs, refinancing existing debt, repairing existing capital, among other uses.
The SBA loans money to community-based non-profit, non-traditional lenders. Then, these lenders provide business owners with loan amounts up to $35,000. With the SBA Microloan program, you can purchase inventory, furniture, equipment, and afford other business expenses.
If your business experiences damage from a declared disaster, such as a drought, fire, storm, or flood, you can receive low-interest financing from the SBA to make it through the difficult time. SBA Disaster Loans can be used for inventory, real estate, equipment, restructuring debt, and other costs that will help you continue your business.
The SBA provides lenders with up to a 90 percent guarantee on export loans. There are three types of export loans: Export Express, EWCP, and International Trade Loan Program. These SBA loans serves as a credit enhancement, and then the lenders can make the required export financing available.
This type of SBA financing provides recipients with fixed or revolving lines of credit. You can receive up to $5 million. With CAPLines, you can choose a contract loan, seasonal line of credit, builders line, or working capital line of credit.
SBA Express Loans are a fast way to acquire financing. Once you submit your application, the SBA will let you know if you qualify, and you could receive financing within 36 hours.
Community Advantage Loans:
This financing program is provided through community lenders, and is available to startups and other businesses in high-need communities.