SBA Loans
A business loan that is backed by the U.S. Small Business Administration is known as an SBA LOAN. The SBA does not actually lend directly, unlike what many people think. Instead, the SBA establishes standards for participating lenders and backs up to 85% of the loan, which reduces risk for the lender and enhances the chance of loan acceptance.
7(a)
- Up to $5m
- In as fast as 45 days
- Fixed interest rate as low as prime + 2.25%
- Terms from 10 years to 25 years
- Fees of 1.7%-2.25%
- Monthly payments
WHAT YOU NEED TO KNOW
The SBA 7(a) Loan is the most well-known SBA loan program, mostly due to its adaptability and broad variety of permitted uses. Collateral will probably be needed for loans of up to $25,000, and for loans of up to $350,000 the maximum amount of available collateral will probably be needed (personal assets can be used to supplement business collateral). The 7(a) small loan, which only goes up to $350,000, can be fast-tracked by the lender with somewhat laxer requirements as long as the application passes the SBA pre-screen process. In contrast to the standard 7(a) loan, which goes up to $5 million and has relatively strict credit requirements and occasionally takes up to 60 days to fund. The application will just have a failure message if it doesn’t pass the pre-screening procedure.
USES
- Refinance debt
- Buy land
- Finance construction expenses
- Purchase equipment, furniture, materials, or supplies
- Expand or acquire an existing business
Express
- Up to $350,000
- In as fast as 30 days
- Fixed interest rate as low as prime + 4.5%
- Terms from 7 years to 25 years
- Fees vary based on lender
- Monthly payments
WHAT YOU NEED TO KNOW
An SBA Express Loan can be the solution if you need money right away. They are similar to the typical SBA 7(a) loan in many aspects, including authorized uses of money and funding conditions. While SBA Express loans typically have less favourable interest rates than 7(a) loans, their applications frequently receive credit decisions within 36 hours and frequently fund after only 30 days, which is a significantly faster funding speed than 7(a) loans. This is the key difference between them.
USES
- Working capital (5 to 10-year term)
- Line of credit (7-year term)
- Commercial real estate (25-year term)
504
- Up to $5m
- In as fast as 60 days
- Fixed interest rate as low as 5%
- Terms from 10 years to 25 years
- Fees of 3% of the loan amount
- Monthly payments
WHAT YOU NEED TO KNOW
The SBA CDC/504 Loan has various advantages including 90% financing, no balloon payments, lengthy amortizations (10 to 20 years), and low fixed interest rates (5%-6%). It can be used to purchase fixed assets or improve existing assets. A 10% down payment is necessary since the SBA bank only contributes 50% of the funding and an SBA-approved certified development company contributes the other 40%. For this program, you need a 20% personal guarantee, a business tangible net value of $15 million or more, and an average net income of $5 million or less over the two years prior to your application. Since two lenders are involved in the approval process, a large portion of the underwriting is focused on the project expenses.
USES
- Purchase long-term equipment
- Refinance debt from facility renovation, equipment refurbishing, and/or business expansion
- Acquire an existing building
- Buy land or finance land developments like landscaping, creating new parking lots, and grading
- New facility construction or existing facility renovation
