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Finding the right SBA loan for your business

Whether you’re thinking of starting a business or already running it, money is your lifeline. Small businesses have financing as an important factor in keeping their business afloat and at some point getting financing for their business turns out to be in their best interest. The Small Business Administration (SBA) helps put the pieces together for small businesses. It offers them the financing they need to run their businesses and even grow them.

This is a federal government agency that has worked for many small businesses. Instead of lending money directly to businesses, it establishes and uses guidelines for lending through partners like credit unions, microcredit institutions, banks, and community development organizations. The SBA takes the risk out of lenders by guaranteeing the payment of portions of loans granted. It can be termed as a win-win situation because the entrepreneurs get the financing they need and the lenders make sure that the loans will be repaid, which makes the agency very beneficial. Loans simply offer access to capital at lower costs without the requirement to give up equity.

loan programs

It is important to note that SBA loan programs are structured specifically for small businesses that do not have access to other types of financing. As a small business person, you should be familiar with loan programs so you can apply for the right one for your business.

7(a) Loan Program: This is the primary program intended to help new businesses as well as existing small businesses that need financing. The loans are basic and the money can be for general business purposes such as equipment, machinery, working capital lease improvements, fixtures and furnishings, and other business needs. Basically, it can deal with business acquisitions, consolidation of unsecured debt into a new loan, purchase of large inventories, and business expansion.

CDC/504 Loan Program: This SBA loan program offers long-term financing for the purchase of large assets. Assets can include commercial real estate, buildings and land, or even equipment. Loans typically cover 40% of the total project cost, with the participating lender covering 50% and the borrower contributing the last 10%. Loans under this program are never used for inventory or capital.

Disaster Loans – Businesses can be affected by disasters and this can be devastating to any business. The SBA extends disaster loans to businesses affected by declared disasters. Low-interest loans are structured to help replace or repair damaged machinery, personal property, business assets, inventory, and equipment. Basically, you’ll get back on your feet after a disaster strikes at very low interest using this loan program.

Microloan Program: The loan program provides very small loans to new, growing, or newly established businesses. They typically have SBA-appointed intermediary lenders, most of whom are nonprofit organizations with some experience in lending and technical assistance. Although small loans cannot be used to pay off existing debts or purchase real estate, they are still useful for the purchase of fixtures, equipment, machinery, supplies, and inventory or used as working capital.

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