SBA Small Business Loan

The SBA (Small Business Administration) offers guarantees to small businesses seeking the expansion or improvement of their existing business, or looking to build a startup. In most cases it is a commercial lending institution that makes the loan, with the SBA acting as the guarantor: putting up the principal (usually between 10% and 75% of the loan amount, but going as high as 100% in some cases).

The SBA has many different small business loans to offer. The most commonly used program is the SBA 7(a) loan. In the SBA small business loan 7(a), the SBA acts as a guarantor for up to 1.5 million dollars on loans of up to 2 million dollars. The primary function of this guaranty is to allow small businesses with adequate cash flow but inadequate capital to get loans through normally closed channels. In certain cases a lending institution will feel that a loan will be more secure with an SBA guarantee, and that is when the 7(a) loan comes into play.

The application process can be lengthy, but mostly hinges upon the applicant's ability to repay the debt. That's why an applicant's character and business experience will also come into play, while a personal guarantee and credit history is required from each of the small business' principals (owners of 20% or more).

The 504 or CDC loan is an SBA small business loan program designed to help small businesses get loans for "brick and mortar" type financing. This can include, but is not limited to, construction, long-term equipment and machinery, and real estate. These fixed assets represent the collateral on the loan, which is financed in the following way: 50% by a commercial lending institution, 40% by a CDC (Certified Development Company) that is fully guaranteed by the SBA, and 10% by the borrower.

These CDC's are set up around the nation in order to encourage small business growth in their individual communities, and therefore this program is only available in those communities that have CDC's. These loans usually have a maximum of $1,500,000 but can be increased to $2,000,000 for certain principals (such as women and veterans) and $4,000,000 for businesses that fall under the "small manufacturers" category.

The 7(m) microloan is an SBA small business loan available to small business owners looking to expand with certain investments including:

• furnishings
• fixtures
• supplies
• machinery
• equipment
• inventory

This is a small loan-a maximum of $35,000 dollars-that is fully guaranteed by the SBA and distributed by nonprofits with experience assisting small businesses and lending money.

These are the three main small business loans offered by the SBA. The SBA also offers technical advice and reviews of loan applications. It is important to note that the SBA does not lend any money; instead, they act as guarantors for loans made by other institutions.