SBA Business Loans

There are a variety of SBA business loans available from Small Business Administration (SBA). These loans are limited in amount and are often available only to startups or early-stage business that are not eligible for other debt financing. However, when available, SBA loans are a great financing option since they have low interest rate and longer loan term.

SBA Loan Guarantee

SBA loan guarantee offers lenders a guarantee on loans to small businesses that might not otherwise qualify for the loan. In the case that the borrower fails to repay the loan, the lender can usually recover up to 75 to 85 percentage of the original loan principal from the SBA. The SBA prefers an owner's equity investment of no less than 25 percent.

Eligibility For SBA Loans:

• Be small enough to fit SBA's small business criteria
• Be a type of business acceptable to SBA
• Be for-profit
• Be independently owned and operated
• Not be dominated in its industry
• Have applied for, and been denied, a conventional loan by a private lender.

Types of SBA Business Loans:

• Microloan program is an ideal fund source for micro business or SOHO business that need a short term loan from $100 to $35,000. These loans are administrated through responsible nonprofit groups, such as local economic development organizations or state finance authorities, that are selected and approved by the SBA.
• 7(a) loan guarantee loan program includes a variety of specialized loan programs, but the most popular has been "LowDoc". This program was implemented in 1993 to increase the availability of small loans (up to 150,000) to businesses by reducing the paperwork previously required for an SBA loan guarantee. About 90% of applicants are able to obtain financing through this program.
• The sectio 504 program makes long-term loans for equipment and land, and for interest on an interim loan. Terms are up to 20 years with low down payment and 3% interest rate. There are often administered by or partnered with local government.

For more information about SBA loan programs, visitSBA webiste.