Who Qualifies For An Sba Loan?

Whether you are thinking of starting a business or you are already running one, money is your lifeline. Small businesses have financing as a major factor in keeping their businesses afloat and sometime getting funding for the same proves to be most beneficial for them. Small Business Administration, SBA, helps piece it together for the small businesses. It offers them the funding that they need to operate the businesses and even grow them.

This is a federal government agency that has come through for many small businesses. Instead of lending the money directly to the businesses, it sets and uses guidelines for the loans through partners like credit unions, micro-lending institutions, banks and community development organizations. SBA eliminates lender risks by guaranteeing repayment of portions of loans granted. It can be termed as a win-win situation because the business people get the funding they need and the lenders get assured that the loans will be repaid making the agency very beneficial. The loans simply offer access to capital at lowest costs without the requirement to give up equity.

The loan programs

Important to note is that SBA loan programs are specifically structured for small businesses that do not have access to other kinds of financing. As a small business person, you should be familiar with the loan programs so you are able to apply for the right one for your business.

7 (a) loan program – It is the primary program meant to assist startups as well as existing small businesses that need financing. The loans are basic and the money can be for general business purposes like equipment, machinery, working capital leasehold improvements, fixtures and furniture and other business needs. You can basically take care of business acquisitions, consolidating unsecured debts into a new loan, large inventory purchase and business expansion.

CDC/504 loan program – This loan program under SBA offers long term financing purchase of large assets. The assets can include commercial real estate, buildings and land or even equipment. The loans usually cover 40% of total project cost, participating lender covers 50% and the borrower puts up the last 10%. Loans under this program are never used for inventory or capital.

Disaster loans – Businesses can be affected by disasters and this can be devastating for any business. SBA extends the disaster loans to businesses that are affected by disasters that have been declared. The low interest loans are structured to assist in replacing or repairing damaged machinery, personal property, business assets, inventory and equipment. You will basically manage to get back on your feet after disaster strikes at very low interests using this loan program.

Microloan program – The loan program gives very small loans to business startups, growing businesses or newly established ones. They usually have designated intermediary lenders by the SBA most of which are nonprofit organization with some experience in technical and lending assistance. Even though the small loans cannot be used for the payment of existing debts or real estate purchases, they still come in handy for purchase of fixtures, equipment, machinery, supplies and inventory or used as working capital.