ANALYTICAL FINANCESTM
ANALYTICAL FINANCES

Small Business Loans (SBA Loans)

The SBA offers numerous loan programs to assist small businesses. The SBA is primarily a guarantor of loans made by private and other institutions.

PROGRAMS

Basic 7(a) Loan Guaranty - the SBA’s primary business loan program to help qualified small businesses obtain financing when they might not be eligible for business loans through normal lending channels. It is also the agency’s most flexible business loan program, since financing under this program can be guaranteed for a variety of general business purposes.  

Loan proceeds can be used for most sound business purposes including working capital, machinery and equipment, furniture and fixtures, land and building (including purchase, renovation and new construction), leasehold improvements, and debt refinancing (under special conditions). Loan maturity is up to 10 years for working capital and generally up to 25 years for fixed assets.  

Lender are guaranteed for up to 75% of the total loan amount up to a maximum guarantee of $750,000. Lenders are guaranteed for up to 80% of the loans under $100,000. 7(a) loans have no prepayment penalties.

Certified Development Company (CDC), a 504 Loan Program - Provides long-term, fixed-rate financing to small businesses to acquire real estate or machinery or equipment for expansion or modernization. Typically a 504 project includes a loan secured from a private-sector lender with a senior lien, a loan secured from a CDC (funded by a 100 percent SBA-guaranteed debenture) with a junior lien covering up to 40 percent of the total cost, and a contribution of at least 10 percent equity from the borrower.  

CUSTOMER: Small businesses requiring “brick and mortar” financing

DELIVERED THROUGH: Certified development companies (private, nonprofit

corporations set up to contribute to the economic development of their communities or regions)

Eligibility for the 504 program is determined by net income and net worth of the borrower. The 504 program is available only in 10 or 20 year terms and the debenture portion of the loan carries a prepayment penalty if paid during the first half of the loan term.

SBA Loans are partially guaranteed by the SBA. The borrower will unlikely ever meet with an SBA representative and the SBA will rely on a written application of the lender in order to approve the request for a guaranty. The purpose the SBA is to guarantee a portion of the loan there by enhancing the lenders credit position in the loan and thus making the funds available to the borrower that would otherwise be unavailable. The lender will continue to service the loan through maturity. In the event of default the SBA may be required to purchase the guaranteed portion of the loan from the lender.

The SBA (7)a Loan 

  • Size : $100,000 to $2million 
  • Maturity: Generally working capital is 5-10 yrs; Fixed assets up to 25yrs
  • Interest Rates: competitive - call for rates.
  • SBA Guaranty fee: between 2% to 3.75% of SBA guaranteed portion
  • Loan Packaging fee: $750 to $2,000, based on size of loan, collected at time of loan being submitted.
  • Fee can be financed into the loan

Use Of Proceeds

  • Expansion, renovation or construction of new facility
  • Start ups (Motels; Gas stations; Restaurants; Franchises etc)
  • Purchase land or buildings
  • purchase equipment, fixtures
  • leasehold improvements
  • working capital
  • inventory acquisition

Loan Qualifications and Considerations

  • Retail and service businesses with 3yrs sales not exceeding $6 million-$20 million
  • Must meet SBA employee size requirements
  • show good character and credit
  • have management expertise and commitment to the business
  • must show ability to repay loan
  • loan must not be for speculative or investment purposes

Documentation Requirements

Collateral Requirements

PROGRAM: Microloan, a 7(m) Loan Program

FUNCTION: Provides short-term loans of up to $35,000 to small businesses and not-for-profit child-care centers for working capital or the purchase of inventory, supplies, furniture, fixtures, machinery and/or equipment. Proceeds cannot be used to pay existing debts or to purchase real estate. The SBA makes or guarantees a loan to an intermediary, who in turn, makes the microloan to the applicant. These organizations also provide management and technical assistance. The loans are not guaranteed by the SBA. The microloan program is available in selected locations in most states.  

CUSTOMER: Small businesses and not-for-profit child-care centers needing small-scale financing and technical assistance for start-up or expansion


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