A Mini Guide to SBA Loans

When you start a business, you need money. It is as simple as that. Most entrepreneurs, however, don’t have this money. Unless you’ve worked for years and saved it up or have started successful businesses in the past, you probably need someone to lend you enough money to get your business started. But this is where the next hurdle comes in, because if you’ve just started your business and don’t have the resources yourself to fund it, you probably also aren’t a bank’s first choice to lend to. Your business probably doesn’t have established cash flows or the assets to secure a loan against. So what do you do?

Thankfully, there is a solution for you. That solution comes in the form of a decades old government institution known as the Small Business Administration. This agency was signed into law by Eisnehower back in the early 50’s with the goal of helping small businesses make the most of their opportunities. While they also offer coaching and help accessing federal contracts, they are perhaps best known for their loan programs. We spoke with one SBA lender, aldoracapital.com, to get a better idea.

SBA loans – one has to be right for you

It is a bit of a misnomer to call something an SBA loan, since they themselves don’t actually provide most loans. The SBA simply insures the loan, promising to pay back part of the sum to the lender if you default. There are a number of different loan options, each specifically tailored to fit your business.

7(a) loans

These are the most common SBA loan. Meant for businesses that cannot access capital at a reasonable rate anywhere else, you can access up to $350,00 in working capital so long as you are able to provide a down payment (usually ten percent) and have a decent personal credit history. These loans can go up to $5,000,000 if the intended use involves commercial real estate.

SBA Express loans

These loans are actually a part of the 7(a) program, but they are meant to be used by businesses that need the cash immediately. While no one is likely to loan you large sums of money the day you need it, an SBA Express loan can be approved in as little as three days. This speeds up the timetable for your loan substantially. These are ideal for businesses with cash flow or inventory problems that need a quick fix to get them over the hump.

SBA Microloans

As the name implies, these loans are quite a bit smaller than the regular loan amount the SBA secures. These are perfect for small, home based businesses that need help kicking things off. Imagine a mompreneuer that needs some cash to fund the first few months of operation for her business, or perhaps but her first round of inventory before cash starts coming in. These loans – under $50,000 in size – can be used for all sorts of purposes like this.

SBA Disaster Loans

Once again, the name says it all. These loans are meant for businesses that have recently suffered from some kind of disaster, be it natural or man-made. They can be up to $2,000,000 in size and are available for repairing and replacing critical parts of your business, be that physical property or something else. The SBA administers these loans through their field offices and they are often only available in areas that have been approved for them. For instance, with the recent hurricane in Florida, it is likely the SBA field offices in the Southwest will begin offering them to distressed businesses there.

The SBA has so many different loan programs, if you can’t find one that fits your business then you probably aren’t looking hard enough! Whatever your need, there is a program specifically tailored to help you. If you meet their definition of a small business then there is no sense in not applying. Many businesses credit their success to the help they received from the SBA, both monetarily and through their coaching and support programs. There is no better day than today to reach out and see how they can help you!

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