Posted Under: Business, Capital, Financing, Small Business, Startup

SBA provides a number of financial assistance programs for small businesses including 7(a), 504 and disaster assistance loans but understanding these programs, their benefits and requirements can be very overwhelming… This write up is an attempt to develop a summary review of SBA’s loan programs. Though the SBA does not provide grants to help you start a business, there are loans available to help your business grow. Let’s take a look what these loan programs are and talk about them in plain English:

Loan: SBA Express Loans
Loan Benefits: Good source of long term financing for working capital needs.
Eligibility: Borrower(s), Business and Use of Proceeds all need to be eligible. Business need to be over 18 months. Owners should be either US citizens or Green card holders.
Use of Proceeds: Usually used for financing working capital needs or for buying equipment.
Loan Amounts: Up to $350,000. Loans up to 100,000 do not require any income proof. Loans above $100,000 require last 2 yrs of business and personal tax returns on all principals having more than 20% stake.
Rate structure: Rates adjust quarterly, indexed off the Wall Street Journal Prime rate. Typical rates vary from prime plus 1 to prime plus 4.
Typical Loan Amortization: Up to 7 years, fully amortized. Typical loan term is around 3 to 5 yrs with an option to roll over up to 7 yrs.

Loan: SBA 7(A) Loans
Loan Benefits: Excellent source for flexible use of proceeds. No balloons or calls and provides highly leveraged financing.
Eligibility: Borrower(s), Business and Use of Proceeds all need to be eligible. Owners should be either US citizens or Green card holders. Foreign aliens qualify if they own less than 49% of the business.
Use of Proceeds: Financing for long and short term assets used in the normal business operations. Acquisitions and refinances are eligible, and may include real estate and business goodwill. Working lines of credit up to $100,000 are also eligible.
Loan Amounts: Up to $2,000,000 Loans require last 3 yrs of business tax returns, real estate schedule if applicable and 2 yrs of personal tax returns on all principals having more than 20 % stake.
Rate structure: Rates adjust quarterly, indexed off the Wall Street Journal Prime rate. Typical rates range from Prime plus 1 to prime plus 2.
Typical Loan Amortization: Amortization depends on the use of proceeds. Loans amortize from 7 to 25 years. Loans are fully amortized with no Balloons or Calls.

Loan: SBA 504 Financing
Loan Benefits: An excellent long term fixed rate product.
Eligibility: Small business concern must occupy at least 51% and use the property along with meeting federal business size standards. It should not have sales of over $6 million or employ more than 500 employees.
Use of Proceeds: Used to finance long term assets like real estate or equipment.
Loan Amounts:
1st Mortgage = No Limit
2nd Mortgage
Rate structure:
1st Mortgage = both fixed and adjustable rates are available.
2nd Mortgage = Fixed rates only.
Typical rates are around prime minus 1 on fixed rates.
Typical Loan Amortization:
1st Mortgage loan provides a maximum amortization of 25 years.
2nd Mortgage loan provides a maximum amortization of 20 years.

More information: SBA