If you are a small business owner and need capital but don’t have the necessary qualifications for a conventional business loan, you may find that SBA loan programs are a viable option. SBA loans are provided through local lenders but are backed by the United States Government. There are several different SBA loan programs with funding that can be used for several different purposes.
The SBA loan programs are good because they typically offer lower interest rates than traditional loans and can be obtained with lower credit scores. In this article, we’ll take a closer look at some of the various SBA loan programs.
SBA Loan Program Options
When it comes to loan programs offered through the SBA, there are four main types and are designed for those who don’t qualify for other forms of financing.
7(a) Loan Program
This is the primary program that exists to assist startups and existing small businesses get their hands on the funding they need. This money can be used for a variety of general business purposes, including the purchase of machinery, equipment, furniture, fixtures, and more. This money can also be used to purchase or renovate land and/or buildings. The maturity rate typically ranges to 10 years for working capital and 25 years for fixed assets.
504 Loan Program/CDC
This program offers businesses long-term fixed-rate financing for assets such as buildings and land. Typically, the loans are structured like this: SBA provides 40%, a participating lender provides 50%, and the borrower must put up the remaining 10%. You can use these funds to purchase machinery, buildings, or land and to renovate/construct facilities.
Businesses cannot use these funds for inventory or working capital. To qualify, your business must have a net worth of under $15 million and an average income of no more than $5 million after taxes for the 2 years before the application submission. The maximum loan amount is $5 million.
Newly established or growing small businesses can obtain small loans through this SBA loan program. The funds can be used to purchase inventory, furniture, supplies, equipment, machinery, or fixtures. These funds are available to designated intermediary lenders, non-profits that have experience in lending and technical assistance. The average loan is around $13,000 but can go up to $50,000. These cannot be used to purchase real estate or pay off existing debt.
Disaster Loan Program
The final SBA loan program is the disaster loan program. This is offered to businesses that have been affected by a disaster. They are low interest and can be used to repair/replace damaged personal property, business assets, real estate, inventory, machinery, or equipment.
As you can see, there are several SBA loan programs. To learn what you qualify for and for assistance applying to these programs, contact Rexford Commercial Capital today.