The U.S. Small Business Administration (SBA) was founded as an independent federal government agency to help American businesses get started, compete, and thrive by helping business owners access funding. Today, there are 33.2 million small business in the U.S., comprising 99.9% of all businesses. The SBA also has a variety of resources available for small businesses, including programs for businesses owned by women, veterans and Native Americans. If you a thinking about starting a small business in Louisiana or are a small business looking for a loan, this article will explore the most popular types of SBA financing available.
Types of Small Business Administration Loans
Although the SBA offers several helpful loan programs and resources, they don’t directly finance business loans. Their role is to create guidelines for loans that an SBA lender, like Bonvenu Bank, will underwrite, by offering a guarantee to help reduce the risk to the lender since the SBA is promising to pay back a portion of the loan if the business owner defaults. What that means is that when you apply for an SBA loan, you’re technically applying for a commercial loan with SBA loan requirements, which helps more business owners qualify for funding where they may not otherwise.
SBA Loan 7a
The SBA loan 7a is generally used to fund the purchase of new equipment, inventory and supplies, upgrading or constructing a new building, covering operating expenses, seasonal financing and other capital needs. This type of SBA financing can also be used to start a new business, acquire a business or expand an existing business.
SBA 504 Loan Program
The Certified Development Company (CDC)/504 SBA Loan is suited for businesses who need financing for fixed assets, such as equipment or real estate. You can use a SBA 504 loan from Bonvenu Bank to:
- Buy land or buildings
- Improve your business’s area (e.g. parking lot, street, landscaping, etc.)
- Build new facilities or upgrade your current one
- Buy equipment or machines
Note that you can’t use an SBA 504 loan for working capital, to repay debt, or invest in a risky real estate deal.
SBA Disaster Loans
When Mother Nature strikes down your business or home, you can turn to the SBA for help. The SBA offers disaster loan assistance to help business owners, nonprofits, homeowners and renters receive low interest financing to get back on their feet. If your business is located in a declared disaster area, you may apply for a SBA Disaster Loan to help repair or replace the damaged property, up to $2 million. You may also use this SBA loan type to receive a working capital loan to relieve the “economic injury” created by the disaster.
SBA Microloan
Another SBA loan program is an SBA microloan, which offers up to $50,000 in funding to small businesses and some non-profit childcare centers startups. These loans can be used for working capital, inventory and supplies, furniture or fixtures and equipment or machines.
SBA Loan Requirements
The SBA guidelines for each of their loan programs are very detailed. The criteria include the size of your business, whether you owe money to the government, where your business operates, the owner’s character, and what a business does to make a profit.
The easiest way to wade through the SBA loan requirements and details is to work directly with an SBA lender like Bonvenu Bank. Contact us today or visit a branch.
