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The Small Business Administration was created in 1953 by the U.S. government to promote the economy by providing financial assistance to small companies. The SBA has a number of loan programs to help fund most small business needs. These are made available by approved, private lenders with the aid of SBA financing.

7(a) General Small Business Loans

The 7(a) is the most common SBA loan and has a maximum cap of $5 million. These loans may be used as short or long-term working capital. They may also be used to purchase machinery or inventory, business real estate or supplies. The 7(a) funds can be used to create a new business or to conditionally refinance existing business debt. Potential borrowers will be asked to provide extensive documentation, including three years worth of personal and business tax returns, profit and loss statements, projected financial statements, business licenses and leases and a brief history of their business. Loan repayment terms are up to 25 years for real estate, up to 10 years for equipment purchases and up to seven for working capital needs.

Microloans

The SBA created the Microloan program to service the needs of fledging companies that only need a small infusion of capital to help their companies thrive. The limit on these loans is a maximum of $50,000. Small firms can use this money as working capital or to buy needed equipment or supplies like a 7(a) loan, but they cannot use it to pay off debts or buy real estate. These Microloans are designed to provide inexperienced business owners with mentoring from their lenders, which may include mandatory training classes. Microloans must be repaid within six years.

Real Estate and Equipment Loans

The CDC/504 is a loan that assists small businesses in purchasing land and new or existing buildings. The proceeds can also be used for renovating existing structures. Because it is specifically designed for real estate related purchases, the CDC/504 loan may not be used for working capital, inventory or debt refinancing. Lenders are also careful to make sure borrowers do not use the funds for any type of real estate speculation or investment. The maximum loan amount is between $4 million and $5.5 million, depending on the company’s purpose for the funding, and the loan terms can be either 10 or 20 years.

Disaster Loans

In the event of a declared natural disaster, businesses of any size in the affected area can receive relief funds through the SBA. These loans have a maximum limit of $2 million and can be used to repair or replace anything damaged during the natural disaster. They can even be used to make up for lost profits due to the calamity. Interestingly, SBA disaster loans are also available to individual homeowners, renters, homeowners associations and other similar organizations to replace and repair property damaged in the catastrophic event.  Disaster loans can also be used to help small businesses who have suffered financially because of a military reservist employee being called up to active duty. All funding must be repaid within 30 years.

Information courtesy of the Small Business Administration.


Search for Small Business Loan Sources and receive your matched lender list
AND received FOUR free Business eBooks worth $39.95!
Search for Small Business Loan Sources