How SBA Loans Work:
The Small Business Association (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, 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
- Have no past-due payments on federal government loans
SBA 7(a) loan:
This is the most popular SBA product. It provides flexibility to business owners looking for up to $5 million in financing. 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 in order 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 microloans up to $35,000. With an SBA Microloan, 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.