SBA Loan Program

SBA Loans:
Your Ultimate Guide to Securing Small Business Funding

What Are SBA Loans?

Small Business Administration (SBA) loans are government-backed loans offered through banks and lenders designed to support small business growth. SBA loans feature attractive terms and lower interest rates, making them ideal for entrepreneurs seeking to expand, purchase equipment or real estate, manage cash flow, or refinance existing debt.

Types of SBA Loans

1. SBA 7(a) Loan

The most popular and flexible SBA loan designed for:

• Working capital
• Equipment and inventory purchases
• Refinancing existing debt
• Business expansion and acquisition

2. SBA 504 Loan

Ideal for large real estate or major equipment investments:

• Loan Amounts: Typically range from $500,000 to $5.5 million. For larger projects, loans can reach up to $5.5 million per project, with the lender’s portion allowing for the total amount financed to be much higher.
• Debenture Structure
  • Funded by selling SBA-backed debentures (bonds) to investors.
  • Debentures have fixed interest rates and repayment periods up to 25 years.
  • The business typically provides about 10% as a down payment; the lender contributes approximately 50%, and the SBA-backed Certified Development Company (CDC) finances up to 40%.

Role of Banks in 504 Loans

Banks typically partner with CDCs (Certified Development Companies) to finance SBA 504 loans. The bank covers up to 50% of the project costs, offering competitive rates and terms, while the CDC funds around 40% via SBA-backed debentures.

Benefits of SBA Loans

• Competitive Interest Rates: Lower rates compared to traditional loans.
• Flexible Terms: Longer repayment periods reduce monthly payments.
• Government Backed: Reduces lender risk, making approvals easier.
• Supportive Resources: Access to SBA resources, training, and support.

Eligibility Criteria

Typically, to qualify for an SBA loan, your business should:

• Operate for-profit in the U.S.
• Meet SBA-defined small business size standards
• Demonstrate good credit and the ability to repay
• Operate in an eligible industry