sba loans - the ultimate guide

by FitSmallBusiness.comThe Ultimate GuideSBA Loans

sets the guidelines for the approval of loans and guarantees part of their repayment.

The

sets the guidelines for the approval of loans and guarantees part of their repayment.

The

This guarantee lowers the risk for SBA lending partners which include banks, community development organizations, and micro-lending institutions.

often have: SBA loans

often have: • Lower interest rates.SBA loans

often have: • Lower interest rates.

• Longer repayment periods.SBA loans

• And other more favorable terms than non-SBA loans.

often have: • Lower interest rates.

• Longer repayment periods.SBA loans

The Personal

Guarantee

The Personal

All SBA loans require personal guarantees for every owner of at least 20% of the business

Guarantee

may be included as collateral

Your home

But this depends on the value of the assets already pledged as collateral and the size of the loan.

may be included as collateral

Your home

The May require a professional appraisal of both your business and personal assets.

For more information on SBA loan collateral and the personal guarantee, see this page.

The May require a professional appraisal of both your business and personal assets.

Types: SBA loans

• Disaster Loans

• The 7a General Small Business Loan• The 7a SBA Express• The CDC/504 Real Estate and Equipment Loan

Types: SBA loans

• Disaster Loans

• The 7a General Small Business Loan• The 7a SBA Express• The CDC/504 Real Estate and Equipment Loan

These loan programs have different purposes and terms, which this guide will explore in order to help you understand which SBA loan is best for you and your small business.

The 7a GeneralSmall Business Loan

The 7a GeneralIs appropriate for most types of business. One well known use of a 7a loan is for the purchase of a franchise.

Small Business Loan

7a Loans Can also be used for a wide range of other purposes.

7a Loans Can also be used for a wide range of other purposes.

• Long or short-term working capital• Purchase equipment and real estate • Construction• Business acquisition• Refinancing

loan amount for the 7a, and the maximum is

There isno minimum

$5 million.

The 7a SBAEXpress

The 7a SBAGuarantees a response to an

application within 36 hours.

EXpress

The 7a SBAGuarantees a response to an

application within 36 hours.

EXpress

Follows the same guidelines as the standard 7a but the maximum loan

amount is $350,000.

There is no defined interest rate

On 7a loan, since the actual interest rate is negotiated between the applicant and lender, subject to an SBA maximum.

The maximum interest rate is likely to be several percentage points lower than an equivalent non-SBA loan.

There is no defined interest rate

On 7a loan, since the actual interest rate is negotiated between the applicant and lender, subject to an SBA maximum.

Maximum interest rates that you would pay based on the prime rate at the time this presentation was written.

Less Than $25K $25k - 50K Over $50K

Loans With Terms Under 7 Year

3.25% (base rate) + 4.25% (markup)=

7.5%3.25% + 3.25% =

6.5%3.25% + 2.25% =

5.5%

Loans With Terms of 7 Years or Greater

3.25% + 4.75% =

9.0%3.25% + 3.75% =

8.0%3.25% + 3.75% =

7.0%

The 7a SBAQualifications

According to the SBA, in order to be eligible for a 7a loan

your businesses must:

The 7a SBAQualifications

• Have reasonable invested equity.•Use the funds for a sound business purpose.

The 7a SBAQualifications

• Use alternative financial resources, including personal assets, before seeking financial assistance.

The 7a SBAQualifications

•Be able to demonstrate a need for the loan proceeds.•Not be delinquent on any existing debt obligations to the U.S. government.

The 7a SBAQualifications

•Be able to demonstrate a need for the loan proceeds.•Not be delinquent on any existing debt obligations to the U.S. government.For comprehensive eligibility information,

go here.

Real Estate and Equipment LoanThe CDC/504

Real Estate and Equipment Loan

Is a more specialized form of SBA loan designed specifically for large capital investments in equipment and property.

The CDC/504

Real Estate and Equipment Loan

Can be used to purchase land, make improvements to existing facilities, construct new facilities, and purchase long-term machinery and equipment.

The CDC/504

Real Estate and Equipment Loan

Can be used to purchase land, make improvements to existing facilities, construct new facilities, and purchase long-term machinery and equipment.

The CDC/504

(for a comprehensive list of 7a loan uses, see this article).

ranges between

The maximumloan amount for a

CDC/504 loan

$4-5.5 million

But the exact amount depends on how your small business plans on using the loan in relation to job creation and public policy.

But the exact amount depends on how your small business plans on using the loan in relation to job creation and public policy. For a more detailed explanation check our main article here.

QualificationsCDC/504The

• Have a tangible net worth less than $15 million and an average net income less than $5 million after taxes for the preceding two years.

QualificationsCDC/504The

• Not be engaged in speculation or investment in rental real estate.

QualificationsCDC/504The

• Not be engaged in speculation or investment in rental real estate.• Not have funds available from other sources.

QualificationsCDC/504The

• Have the ability to repay the loan on time from the projected operating cash flow of the business

Disaster Loans

Disaster LoansThe SBA offers a number of different disaster loans, but the two types relevant to small business owners are:

Disaster Loans

“Business Physical Disaster Loans”

“Economic Injury Disaster Loans”

If your business has been damaged by a disaster that is in a declared disaster area.

Business Physical You may be eligible for a

Disaster Loan

Businesses are eligible for loans up to $2 million

Which can be used for the repair or replacement of real property, machinery, equipment, and inventory.

Businesses are eligible for loans up to $2 million

You may be eligible for anEconomic Injury Disaster LoanIf your small business, small agricultural cooperative, or non-profit organization has suffered substantial economic injury as a result of a disaster.

Is defined as your business being “unable to meet its obligations and to pay its ordinary and necessary operating expenses.”

Substantial economic injury

with a maximum repayment term of 30 years.

These loans are up to $2 million

with a maximum repayment term of 30 years. For more comprehensive information on Economic Injury Disaster Loans, see this article.

These loans are up to $2 million

disaster loan interest rate

For “Business Physical Disaster Loans”

And less than 8% percent if credit is available elsewhere.

Interest rates will be less than 4 % if credit is not available elsewhere

disaster loans interest rate

For “Economic Injury Disaster Loans”

interest rates will be less than 4%

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