SBA Loans

The most common SBA loan is the 7(a). This loan allows lenders to provide financial help to small businesses and can be used for:

• Acquiring or improving real estate and buildings
• Purchasing or improving equipment, furniture, fixtures, and inventory
• Provide working capital
• Refinance business debt, purchase an existing business, or finance partner buyouts

The 7(a) loan is designed to help small businesses that are creditworthy but do not qualify for a conventional loan. Other eligibility criteria include:

• Operate a for-profit business within the United States
• Business must meet SBA size requirements and be an eligible business
• Demonstrate a reasonable ability to repay the loan
• Other terms, conditions, and eligibility guidelines

The U.S. SBA 504 Certified Development Company Loan program conserves your working capital by requiring, in most cases, a 10% borrower contribution. The 504 loan offers below-market interest rates that are fixed for the life of the loan. This loan is generally used for:

• Expansion or modernization of real estate or large equipment
• Refinancing of large equipment and/or owner-occupied commercial real estate

Loan repayment varies based on several factors:

• Most 7(a) term loans are repaid with monthly payments of principal and interest from the cash flow of the business.
• Payments stay the same for fixed-rate loans.
• Variable-rate loans may have a different payment amount if the interest rate varies.

U.S. Department of Agriculture (USDA) and Small Business Administration (SBA) loans are similar. SBA loans tend to be no larger than $5 million, whereas USDA loans can be up to $25 million and tend to include larger fees and federal guarantees.