Navigating the World of SBA Loan Applications

The loan program of the Small Business Administration is set up to assist companies that might not otherwise qualify for financing. Strictly speaking, the SBA does not loan money. Instead, it guarantees loans that private banks and other financial institutions make to small businesses. Here is some basic information on the various types of SBA loans for which your business may qualify.

SBA Basic 7(a) Loan

The basic 7(a) is the most popular of SBA loans. Your business can qualify if it’s for-profit, has owner equity, operates within the United States or its territories, and you have already attempted to secure financing through other funding methods. You can use the funds for a variety of purposes such as general operating expenses, purchasing property, making building improvements as a tenant, acquiring equipment and inventory, and sometimes refinancing debt.

SBA CDC/504 Loans

The SBA 504 program offers fixed rate, long-term loans for purchasing land, buildings, machinery, and other major assets. You can also construct new facilities or renovate existing ones, but you cannot use the funds for inventory or working capital. Your business can qualify for 504 SBA loans if its net worth is below $7.5 million and in the two years prior to your application its net income was less than $2.5 million.

SBA Micro Loans

If you run a small business or a not-for-profit childcare center, you may qualify for an SBA micro loan. In this program, businesses can borrow up to $35,000 through a non-profit, community-based lender for purchasing machinery, equipment, inventory, furniture, and other needs. You cannot use these loans to finance real estate or pay off existing debt.

SBA Loan Pre-qualification Program

The SBA also has a pre-qualification program that helps companies determine if they are eligible for SBA loans before they apply. SBA-designated intermediaries assess the credit, character, and reliability of business owners and help them strengthen their applications for loans.

For more advice on applying for SBA loans, contact Royalty Business Lending.

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