As an entrepreneur, your goal is to grow your business and realize your dreams. In order to achieve this, you need capital! The SBA (Small Business Administration), an extension of the U.S. Government, offers guaranteed loan programs designed to meet a full range of your business needs. As part of the 2009 American Recovery and Reinvestment Act, SBA ARC loans were created. The goal of ARC loans is to assist small businesses with temporary financial hardships to meet short-term needs to stay in business and retain jobs. These loans are for established businesses that have been profitable in the past, but are going through some tough times.
Do you need real estate? Do you need to expand or modernize facilities? Do you need equipment? Do you need to finance inventory? Small Business Administration loans can help with all of these needs!
Maybe you don’t have the collateral that a private lender would like to see. When you are unable to secure a loan with reasonable terms privately, another option is a Small Business Administration loan. To obtain an SBA loan, you must submit your business plan to your lender, who will attach it with an application to the SBA. The benefit to you, as a small business owner, is to obtain loans at competitive rates. The benefit to your lender is to lower their risk of taking a chance on you, because the government will guarantee most of the loan. The SBA offers a variety of loan programs that have very specific purposes.
Are you a veteran or currently an active member of the military? Have you dreamed of starting your own business? Then the SBA Patriot Express Loan Program may be for you! The SBA Patriot Express Program offers guarantees to participating financial institutions once your SBA loan is approved. The U.S. Government backs up to 85% for loans less than $150,000, and 75% for loans over $150,000. If you are eligible, you may apply for a loan up to $500,000. If you qualify for this program, your interest rates will be around 2.25% to 4.75% over prime, the lowest among SBA loan programs.
Does your small business operate for profit? Do you need to acquire major fixed assets? Expand? Modernize? Increase your cash flow? SBA’s 504 loan program may be for you if you meet certain size standards. This program encourages community growth, job development, and business expansion by offering long-term, fixed-rate financing. It is made available through Certified Development Companies (CDCs), non-profit companies that encourage community development and partner with the SBA. The 504 loan structure has three parts:
- A private-sector lender covers up to 50% of the total project costs, and is the 1st lien holder
- Small Business Administration 504 loan covers up to 40% of the total project costs, and is the 2nd lien holder
- Small business owner (borrower) covers at least 10% of the total project costs
SBA 504 loans can only be used for fixed assets such as real estate, improvements and upgrades, remodels or conversion of existing facilities, and purchase of machinery and equipment needed long-term.
Another program is the SBA 7(a) loan program. If you are a specific business with special requirements needing financial help, this may be for you! It consists of several subsidiary programs. Funds are only available in this program for very specific purposes. This loan program’s main goal is to spark economic growth by committing more capital to small businesses and entrepreneurs in underserved communities. Loans may be used to assist in buying an existing business, expanding an existing business, or starting a business.
Here is a brief overview of the SBA 7(a) loan programs:
- Special Purpose Loans Program- loans for businesses impacted by NAFTA (North American Free Trade Agreement).
- Express & Pilot Programs- loans involving shorter applications and express responses to applications, as little as 36 hours, designed for particular borrowers such as military personnel, borrowers in distressed communities, veterans, etc.
- Export Loan Programs- loans set up to encourage small businesses to develop or expand their exporting activities in order to provide more jobs.
- Rural Business Loans- loans designed to help small rural based communities grow more rapidly
Whatever your industry or small business financial needs are, it is worth your time and effort to check into a Small Business Administration Loan! It can be very beneficial to your growth, and your loan terms can be better than a private lender’s alone. Look into one of these loans today! You’ll be glad you did!