About SBA Loans | Small Business Administration | sba.gov | sba.com | wwwsba

ABOUT SBA LOANS
A Guide to Loans from the SBA (Small Business Administration)

The SBA is Congressionally mandated to assist the nation’s small businesses in meeting their financing needs. The agency’s finance programs enhance the ability of lenders to provide long- and short-term loans to small businesses that might not qualify through normal lending channels.

SBA Loans

There are basically four types of SBA lending and equity investment programs available: the 7(a) Loan Guaranty Program, the 7(m) MicroLoan Program, the 504 Certified Development Company Loan Program and the Small Business Investment Company Program.

The 7(a) Loan Guaranty Program is the SBA’s primary loan program. It is also the most flexible, since the agency can guarantee financing under the program for a variety of general business purposes.

To qualify for an SBA guaranty, a small business must meet the 7(a) loan guaranty criteria, and the lender must certify that it cannot provide funding on reasonable terms except with an SBA guaranty.

The SBA can then guarantee as much as 85 percent of a loan that is $150,000 and 75 percent on loans greater than $150,000. The maximum size loan that the SBA can guarantee is $2 million, and the maximum guaranty that the SBA can provide is $1 million. There are a few exceptions noted separately in this brochure.

In guaranteeing the loan, the SBA assures the lender that, in the event the borrower does not repay the loan, the government will reimburse the lender for its loss, up to the percentage of the SBA’s guaranty. The borrower, however, still remains obligated for the full amount due.

How It Works to get a SBA loan

You submit a loan application to an SBA participating lender for initial review. If the lender approves the loan subject to an SBA guaranty, a copy of the application and a credit analysis are forwarded by the lender to the SBA.

Following SBA approval, the lending institution closes the loan and disburses the funds. You make monthly loan payments directly to your lender.

No balloon payments, application fees or points are permitted with 7(a) loans. The lender can tailor the repayment plan for each business.

Use of Proceeds

A start-up or existing business may use the proceeds of a 7(a) guaranteed loan to —

• expand or renovate facilities;

• purchase machinery, equipment, fixtures and leasehold improvements;

• finance receivables and augment working capital;

• refinance existing debt (under some circumstances);

• finance seasonal lines of credit;

• construct commercial buildings; and/or

• purchase land or buildings.

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