SBA Loan
This guide covers starting or expanding your business with a SBA loan. Most non-recourse loans still require personal guarantees. Non-recourse loans mean the creditor will only go after the property and not the individual if the loan defaults.
Nonrecourse loans benefit because creditors will not come after your personal property if the loan defaults. If there was fraud committed, creditors could go after the borrowers on a personal basis.
The Small Business Administration (SBA) loans are a type of financial assistance provided by the U.S. Small Business Administration to help small businesses and entrepreneurs access capital for various purposes, such as starting a new business, expanding an existing business, or recovering from disasters.
How Does The SBA Loan Program Work
The SBA does not directly fund SBA loans; they are made available through participating lenders, such as banks and credit unions. The SBA provides a government guarantee to these lenders, which reduces the risk for the lenders and encourages them to provide loans to small businesses that might not qualify for traditional loans.
Types of SBA Loan For Small Business Owners
Small business owners can use SBA Loan Programs to start new business ventures. You can qualify for an SBA loan with a 10% down payment. However, recently with the change in guidelines from SBA, borrowers can qualify with 100% second with a seller concession. There are several types of SBA loans, each designed to meet different business needs:
SBA 7(a) Loan Program
This is the SBA’s primary and most flexible loan program. It provides loans for various general business purposes, including working capital, purchasing equipment or real estate, and refinancing existing debt.
SBA 504 Loan Program
This program helps small businesses acquire fixed assets such as real estate and equipment. It involves collaboration between the borrower, a Certified Development Company (CDC), and a lender.
SBA Microloan Program
This program offers small loans (up to $50,000) to help small businesses and certain types of not-for-profit childcare centers start up and expand.
SBA Disaster Assistance Loans
These loans are available to businesses and homeowners affected by declared disasters, such as hurricanes, earthquakes, or wildfires, to help them recover and rebuild.
Express SBA Loan Program
This offers streamlined and expedited loan processing for smaller loans (up to $350,000).
Export SBA Loan Programs
These programs help small businesses involved in export activities, providing financing to support their export-related transactions. It’s important to note that SBA loan can provide valuable financial support to small businesses.
The application and approval process for SBA loan can be more complex than traditional loans due to the involvement of the government guarantee.
Eligibility criteria and terms may vary based on the loan program and the lender’s policies. Suppose you’re considering applying for an SBA loan. In that case, it’s recommended that you research the different loan programs, gather all necessary documentation, and consult with an SBA-approved lender or financial advisor. You must fully understand the best options for your business needs.
