Different Types of SBA Loans

The U.S. government has a number of programs to help individuals who want to start their own business. Opening a small business can be tricky if you don`t have extensive savings to use. Securing a loan to start your business requires a high credit score. Business owners who need some financial support can request assistance from the Small Business Administration. The SBA offers a number of loan options for entrepreneurs who have a solid business plan and some management experience. Learn more about each option before sending in an application to the SBA to ensure you receive funding as quickly as possible. 

The Microloan Program

Microloans are short-term, low amount loans that can be used for a range of small business purposes. Many loans in this category are granted to childcare agencies that are designated as not-for-profit. Other microloans are made to existing businesses that are ready to expand. Microloans are distributed to local lenders that work on a community level to send out the funds. These lenders provide education and interview candidates to determine which businesses can use the funds effectively. Anyone receiving this type of loan can use it to buy inventory, equipment and fixtures. The money can`t be used for paying off another debt or for buying property. No microloans can be given for more than $50,000, but most businesses only borrow about $15,000.


The 7(a) Program

Business owners with unusual needs can apply for a 7(a) loan from the Small Business Administration. These include businesses operating in rural locations where few jobs are available. Business owners in small communities can use the Small/Rural Lender Advantage program to secure funding without a lengthy application process. If your business has been impacted by recent pollution control laws or NAFTA agreements, you can apply for a Special Purpose Loan. The 7(a) program also includes lending for companies that send American goods into the world through exporting.

SBA7(a) loan can be used for starting a new business or buying a successful one. The proceeds are also approved for securing real estate, financing for new construction, refinancing of existing business debts and the acquisition of inventory. The main limitations involve changes that would fail to improve the business. Businesses cannot pay off tax debts or reimburse their owners with the funds either.

The CDC/504 Loan Program

The SBA provides business owners with one last option for financing. Funds are given to Certified Development Companies, or CDCs, located in the community. These groups are non-profit organizations that find small businesses that can support their region and local community if they can expand, improve or modernize their equipment. The CDCs focus on providing SBA 504 loans to business owners that can create local jobs. The SBA reports that this lending program has created more than two million jobs alone.

If you are interested in growing your business or starting a new one, a convenient loans calculator can help you determine the best rate and the amount you can borrow from the Small Business Administration.


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