The SBA Loan
In short, an SBA loan is a type of business financing that is guaranteed by the U.S. Small Business Administration or “SBA”. The Small Business Association sets guidelines and works closely with lenders in order to secure loans for small business owners. The SBA securing the loan minimizes risk for the lender, which makes obtaining small business financing infinitely easier.
According to the Small Business Association, their mission is to help Americans start, build, and grow businesses. This has been the drive of the SBA since its inception in 1953 as an independent agency of the federal government. The Small Business Administration is tasked with aiding, counseling, assisting, and protecting the interests of American small business owners, preserving free competitive enterprise, and maintaining and strengthening the overall economy of our nation.
A common misconception about SBA loans is that the Small Business Administration acts as a lender. While the SBA does create the guidelines for all of the loan programs that bear the SBA name, they are not lenders or servicers of the loans. Instead, they work closely with approved lender partners who agreed to utilize the provided guidelines to originate flexible financing options for small business owners.
Why choose an SBA Loan?
Small Business Administration loans typically range anywhere from $500 to $5.5 million. Loan proceeds from SBA financing can be utilized for most business purposes, including operating capital and long-term fixed assets. Impressively, there are a plethora of loan products under the SBA umbrella to choose from, so no matter what the need is, there is more than likely an SBA guaranteed product that will benefit your business.
SBA loans are available to most small businesses with a few easy to remember requirements. For starters, any business seeking SBA financing must be a for-profit company, must be located in and conduct business in the United States, must have owner-invested equity, and must not be receiving funding from any other financial lender. As with any other business financing, business size, ability to repay, and the purpose of the business is also taken into consideration.
Types of Loans Guaranteed by the Small Business Administration
As we have mentioned earlier, the SBA guarantees many different types of loans to meet the unique needs of most small business owners. There are a few different options when seeking SBA financing, and choosing the right loan for your business is what is most important. While the standard SBA 7(a) loan is the most widely used of the bunch, that does not mean that it is a one size fits all solution for small business funding.
The different SBA loans and what they are used for are as follows:
SBA 7(a) Loan - The standard SBA loan, for up to $5 million in funding.
SBA 7(a) Small Loan - A smaller, more cost-effective loan than the original 7(a), with funding up to $350,000.
SBA Express Loan - SBA financing at an accelerated pace. Funding of up to $350,000 with a streamlined application process and a guaranteed response within 36 hours.
SBA Export Express Loan - Another streamlined loan program, for Export companies looking to secure up to $500,000. Guaranteed response within 24 hours.
SBA Export Working Capital Loan - Up to $5 million for working capital to be used by export companies
SBA International Trade Loan - Long-term financing for growing export companies or exporters competing with imports and foreign competition.
SBA 504 Loan - Up to $5 million STRICTLY for the purchase, construction, acquisition, rehabilitation, and/or modernization of fixed assets.
SBA financing is so much more than just a comprehensive suite of small business financing options, too. The SBA operates using a network of preferred lenders who are able to provide more flexible financing options for business owners. There is also the Veterans Advantage Program that provides reduced fees for the rapidly growing veteran-owned business population. Finally, The SBA has an umbrella program dubbed “CAPLines” which consists of different types of business lines of credit to help small business owners meet their short-term and cyclical working-capital needs.