SBA Loans

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What are the Different Types of Small Business Loans?

January 07, 2019 - 11:00 am
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Whether you're starting a new business or need some capital for a new project, a Small Business Administration (SBA) loan may be the best solution for your business. Part of the mission of the SBA is to boost the economy by strengthening small businesses, and it offers loan options that can help business owners for a variety of funding needs. While it can be difficult to qualify for SBA loans, they often carry lower interest rates. The SBA offers different loans for certain situations, as listed. Check with your local SBA branch to discuss these loans and determine which is right for your business.

 

SBA 7(a) Loan

The 7 (a) loan is a common type of SBA loan. Businesses can borrow up to $5 million with a repayment period of up to 10 years for most loans, or up to 25 years for commercial real estate. Interest rates vary from 7.25 to 9.75 percent, and a 10 to 20 percent down payment is usually required. The 7 (a) loan is most common because it can be used for most business expenses, including expansion and the purchase of real estate. If your business is starting up, be prepared with a business plan before applying. Lenders will want to see accurate financial projections and details of your business, so make sure your business plan is solid.

 

SBA 504 Loan

Another option for the purchase of commercial real estate and/or fixed assets for your business is the SBA 504 Loan. This type of loan is different in that it is partially funded by a Certified Development Company (CDC). Borrowers are required to put down 10 percent of the loan up front, and the loan can only be used for real estate or fixed assets such as equipment or machinery.

 

SBA CAPline

According to the SBA website, CAPlines have been retailored to be easier for borrowers, as they were once hampered by confusing paperwork. CAPlines are intended to help businesses with working capital for reasons including seasonal increases in accounts receivable or inventory, the sale of a company, or purchase of a new building, among others. Most of these loans require that a business has been operating for a minimum of one year.

 

SBA Export Loan

If you operate a business that exports goods to other countries, you may be eligible for an SBA Export Loan. They can be issued for any activity related to exporting, ranging from new market development to purchase of assets for your business. SBA Export Loans can be issued as lines of credit, or they can be paid back over a period of time depending on the purposes and terms of the loan.

 

SBA Disaster Loan

When your small business is halted due to a disaster, the SBA Disaster Loan can help you to repair or replace assets that may have been damaged. In many cases, a business must be located in a declared disaster area before being eligible to apply. However, these loans can save your business from absorbing the costs of a disaster.

 

For entrepreneurs, the Small Business Administration offers viable means of obtaining financing for equipment, expansion, new projects and much more. Check with your local SBA branch to see which types of funding may be right for your business.

 

This article was written by Alaina Brandenburger for Small Business Pulse