Types of Loans

The U.S. Small Business Administration (SBA) has a variety of loan programs on offer for small businesses. There are four main types of loans available, each with different qualifications:

• 7(a) general small business loans. The most common loan program with financing for businesses meeting specific requirements.
• Microloan programs. Small, short-term loans to provide start up funds for small businesses and some non-profit childcare centers.
• CDC/504 real estate and equipment loans. Major financing available to small businesses to cover real estate, facility expansion or equipment costs.
• Disaster loans. Financing for the replacement or repair of real estate, personal property, machinery, equipment, inventory and other business assets that have been destroyed in a declared disaster.

In this blog, we’ll focus on the 7(a) and 504 programs.

Eligibility

The 7(a) loan program is open to businesses, not individuals. The general requirements that a business must meet to qualify are: engage in for-profit operations within the U.S. or its possessions; meet the SBA’s established size standards; invest reasonable amount of equity in the business and utilize any other financial resources before asking for assistance; justify a need for the requested loan and demonstrate that it will be used for sound business purposes; and not behind in payments on any prior debt to the federal government.

The eligibility requirements for the 504 program are similar to the 7(a) loans, requiring for-profit operations within the U.S. or its possessions and maintaining business size restrictions. Additionally, the SBA considers whether the borrowers have the personal or business financial resources to provide the funding that is being requested, whether the cash flow supports the borrower’s ability to repay the loan in a timely manner, whether the borrower has good character, a history of repaying debts, applicable management experience, and a practical business plan.

A list of businesses with special consideration as well as those which are ineligible can be found here.

This blog was written by Bob Amter, President of Montegra Capital Resources, LTD., a Colorado hard money lender.  [google_authorship] has been in the private capital lending business for 41 consecutive years.