Whether you’re thinking of starting a business or already running it, money is your lifeline. Small businesses have financing as an important factor in keeping their business afloat and at some point getting financing for the same turns out to be the most beneficial for them. The Small Business Administration, SBA, helps put the pieces together for small businesses. It offers them the financing they need to run businesses and even grow them.
This is a federal government agency that has worked for many small businesses. Instead of lending money directly to businesses, set up and use guidelines for lending through partners like credit unions, microlending institutions, banks, and community development organizations. The SBA eliminates risk for lenders by guaranteeing repayment of portions of loans made. It can be termed as a win-win situation because the entrepreneurs get the funds they need and the lenders make sure that the loans will be repaid, which makes the agency very beneficial. The loans simply offer access to capital at the lowest costs without the requirement to give up equity.
loan programs
It is important to note that SBA loan programs are specifically structured for small businesses that do not have access to other types of financing. As a small business person, you should be familiar with loan programs so that you can apply for the right one for your business.
7(a) Loan Program – This is the main program intended to help new businesses as well as existing small businesses that need financing. The loans are basic and the money can be for general business purposes such as equipment, machinery, working capital lease improvements, fixtures and furnishings, and other business needs. Basically, you can deal with business acquisitions, unsecured debt consolidation into a new loan, large inventory purchases, and business expansion.
CDC/504 Loan Program – This SBA loan program provides long-term financing for the purchase of large assets. Assets can include commercial real estate, buildings and land, or even equipment. Loans generally cover 40% of the total cost of the project, with the participating lender covering 50% and the borrower putting 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. The SBA extends disaster loans to businesses affected by declared disasters. Low interest loans are structured to help replace or repair damaged machinery, personal property, business assets, inventory and equipment. Basically, you will be able to recover after a disaster strikes at very low interest using this loan program.
Microloan Program – The loan program makes very small loans to start-up, growing, or newly established businesses. They typically have SBA-designated intermediary lenders, most of whom are nonprofit organizations with some experience in loan and technical assistance. Although small loans cannot be used to pay off existing debt or purchase real estate, they are still useful for purchasing fixtures, equipment, machinery, supplies, and inventory or used as working capital.
