Small Business Administration (SBA) business loans come in several sizes and forms. Of course, the SBA does not actually “loan” the money, they only “guarantee” loans made through banks and other financial institutions. The first thing you need to determine is whether or not the SBA considers your business a “small business”. It is generally thought that the standard of 500 or fewer employees comprises a “small business”. However, that is not always the case. The SBA has definitions for small businesses that run from a maximum of 100 employees to 1, 500 employees… and from a maximum of $0.75 million in annual revenue to $27.0 million in annual revenue.
So, your first job is to determine if your business is really considered a “small business”. You can do this by contacting your local SBA District Office, or online.
The 7(a) SBA loan
The most popular of SBA business loans is their 7(a) loan program. Money from this loan can be used for just about any business purpose, and you should apply for this loan through your regular bank. You will need to present a complete business plan when you make your application. Even though the SBA does not make the actual loan, you will have to follow the SBA loan application process.
What this means is that both the bank and the SBA must approve your loan. Both you and your business (if it is currently operating) must have a good credit standing when you make your application. Also, if your bank turns down your loan application–that’s it… there is nothing the SBA can do at this point to help you. Your best bet then is to improve your business plan and look for another bank.
CDC/504 SBA Loan
This is a well-used program, but it is used strictly to purchase the assets of a business, or to pay for physical improvements. The money cannot be used for working capital, refinancing, or repaying debt. This loan program must also be handled through your bank (or other financial institution), so that is where you should start.
This program was intended for short-term loans, with a maximum of $35, 000. The SBA has designated only certain lenders to process these loans. This specific program has not worked well because of the excessive paperwork and government bureaucracy, but it is always worth discussing with your banker, or you’re nearest SBA District Office.
Export Express Loan
The export express loan is for those small businesses that have problems financing exports… usually due to the lengthy time required to process typical export loans. In this program the SBA guarantees up to 90 percent on export loans and gives an approval response in less than 24 hours. Eligibility is the same as for 7(a) loans, but you must have been in business for at least 12 months.
Community Express Program this is currently a very popular program because Sam’s Club has partnered with an SBA business lender to provide low interest rate loans to smaller businesses. The minimum loan is $5, 000 and the maximum loan is $25, 000. You can actually make an online application for this loan at samsclub.com (click on Services). The program was initially set up to make quick decisions on loans in “underserved” communities, and was then expanded through the “Community Reinvestment Act.”
That is a brief overview of the major programs for SBA business loans. Most of these programs can be reached through your local bank, or directly from your local SBA District Office.