SBA 7a Loan Program

The Small Business Administration (SBA) has quite a few different loan programs that entertain all different kinds of small business structures.  The SBA’s flagship loan program is their 7(a) loan program.  The SBA 7(a) loan program is for small businesses that cannot be approved for a conventional bank loan and are looking to buy a business, start a business, or grow a business with purchasing equipment, software, and other assets.  The SBA does not directly lend SBA 7(a) loans to the business community.  The nations SBA certified banks and lending institutions have that responsibility

You must first be turned down for a traditional bank loan before you can apply for one of the SBA’s 7(a) loans

In order to be approved for any kind of SBA 7(a) loan, you must have a good business credit score with all three business credit reporting agencies, a well written business plan, and a business loan application that has proper financials.

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The SBA has an array of SBA 7(a) loans.  All of them serve a different purpose and entertain different business scenarios.

SBA 7(a) Express Loan Programs
These loans are for a certain sort of small business borrower and can be approved much faster then other  SBA loans

SBA Express – This program gives small business owners and entrepreneurs an accelerated turnaround time for SBA underwriting review.  A response to an SBA express loan will be turned around within 36 hours.

Community Express – This loan allows for government guaranteed banks and lending institutions to offer a unique but extremely valuable combination of financial and technical assistance to small businesses that are located in under-served areas of the United States.  These loans are $25,000 or less and are meant for individuals that are looking to start a business.

Patriot Express – This loan program is dedicated to small businesses that are 51% or more owned by United States veterans or current military members.

SBA 7(a) Export loan Programs
These loan programs are dedicated to US small businesses that export products over seas.  70% of small business in the US that export products have less then 20 employees.

Export Express – This loan program helps small businesses start or grow their export efforts within the United States.  These loans or lines of credit are capped at $250,000.  The underwriting guidelines for this loan are decided by each bank or lending institution.

Export Working Capital Program – This loan program is for small businesses that have the capacity to grow their export markets and need additional capital to do so.  Interest rates and underwriting guidelines are determined by the SBA lender.

International Trade Program – This loan program is for small businesses that are looking to start or continue exporting but have been directly affected by imports.  The funds from this loan must put the small business in a position to better compete in the exporting markets.  This loan program caps at $1.75 million.

Rural Lender Advantage Loan Program
This program is more for lenders then it is borrowers.  This program assists small community SBA lenders to streamline the unique application process of small rural community areas within the US.  This program is apart of a larger initiative to promote economic growth in smaller rural communities with a focus on communities that have suffered high unemployment, natural disasters and other natural and economic conditions.

Special Purpose Loan Programs
The SBA has a few different special loan programs for small businesses that have been affected by NAFTA, to provide financial support to employee stock ownership plans, and to help assist with population control.

CAIP - The Community Adjustment and Investment Program loans are for US companies to pay SBA loan fees.  Certain SBA loan fees depending on the loan amount can be quite large.  These loans help pay for those fees.

CAPLines – CAPLines is an umbrella program that helps small businesses meet their short-term and cyclical working-capital needs.

Employee Trusts – This program is dedicated to the financial assistance to Employee Stock Ownership Plans.

Pollution Control – These loans are 100% dedicated to small businesses that have to deal with pollution waist.

SBA 504 Loan Program

The SBA 504 loan program is one of the SBA’s more popular small business loans for small businesses that are looking to purchase major fixed assets such as land, commercial property, or major equipment.  These SBA loans are long term fixed rate loans offered by Certified Development Companies (CDC’s).  A CDC is a private non-profit organization that is dedicated to the economic development of it’s community.  CDC’s work with the SBA and private small business loan lenders to provide financing for small business. 

SBA 504 loans are not for working capital but for fixed asset projects such as property, commercial real-estate, and major equipment

In order for a small business to be approved for an SBA 504 loan you must be able to prove to the CDC’s, SBA and SBA qualified lender that you are a low risk small business borrower.  To be a low risk small business borrower you must have a good business credit score with the three main business credit reporting agencies, a professionally written SBA certified business plan, and a business loan application with proper financials.  With all three of these, being approved for an SBA loan is going to be extremely tough.

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How SBA 504 Loan Funds May be Used
The money you will receive from be approved for a SBA 504 loan can be used in three main ways:

 - Purchasing land, improvements to land, commercial buildings, streets, parking garages, and utilities.
 - Construction of new facilities or the modernization of existing facilities.
 - Purchasing long-term machinery or equipment.

SBA 504 loan funds cannot be used for working capital, refinancing purposes, or paying off debt.

Eligibility
In order to eligible to be approved for an SBA 504 loan your business must be a for profit business and fall within the size limits created by the SBA.  Based on the SBA guidelines, a small business is qualified as small if it has a tangible net worth of less then $7.5 million and does not have a average net income in excess of $2.5 million after taxes for the processing two years.  These loans cannot be made to businesses that are looking to have investment or rental properties.

Interest Rates and Fees
SBA 504 loan interest rates are based on what each CDC lender underwriting guidelines are.  They are usually pegged above the standard market business loan rates for 5 and 10 years US Treasury issues.  Fee’s are a total of 3% of the debenture and if approved may be financed within the loan.