The Small Business Administration (SBA) (www.sba.gov) has a number of loan programs for small companies.
SBA 7a Loan Program
Its basic SBA 7a loan guarantee program is perhaps the best known. The program is designed for small businesses that cannot otherwise obtain a loan. The actual loans are delivered through commercial banks, with the bulk of the loan principal being guaranteed by the SBA. The maximum loan under this program is $2 million, but most of the loans placed are for less. More information on the SBA 7a loan program is available in its website here: SBA 7a loan program.
SBA 504 Loan Program
Another SBA program is the SBA 504 loan program, which provides long- term, fixed-rate financing to small businesses to acquire land, buildings, or equipment. SBA 504 loan program cannot be used for working capital or inventory. The loans are delivered through certified development companies (CDC), which are private, nonprofit corporations designed to contribute to the economic development of their communities. A private lender has a senior lien, and the CDC issues an SBA guaranteed debenture for up to 40% of the loan amount. The debenture is secured by junior lien. The owner must contribute at least 10% of the equity. The maximum SBA debenture is $1 million, which can go to $1.3 million in some cases. More information on SBA 504 loan program can be found at its website: SBA 504 loan program.
SBA 7m Microloan Program
The SBA has a microloan 7m program in which a small business can get a short-term loan of up to $35,000. This loan can be used for working capital, inventory, furniture, supplies, and the like. Microloans are delivered through specially designated intermediary organizations, usually nonprofits with experience in lending. More information on SBA 7m microloan program can be found at www.sba.gov/financing/sbaloan/microloans.html.
In addition, there are other, more specialized programs at the SBA that address the needs of women, minorities, veterans, and Native Americans. More on these loans and other special interest topics can be found at www.sba.gov/financing/index.html.
The SBA has a surety bond program for contractors and other special purpose programs that include an alliance with the Export-Import Bank to promote export trade, employee stock option ownership plans (ESOPS), and lines of credit under the CAPlines program. Information on the SBA programs can be found at www.sba.gov/financing/index.html and the Ex-Im Bank information is at www.exim.gov/products/work_cap.html.
Several misconceptions about the SBA programs seem to surface now and then. The SBA programs are not grants or free money. They are generally loans that constitute legitimate debt and that need to be repaid. It is generally believed that a business has to be a start-up or in distress to apply. Neither of these statements is true. The SBA is not a bailout agency. It finances healthy businesses that need bridge financing or an extended term loan.
