U.S. Small Business Administration (SBA) loan programs have been an essential source of start-up, working, and growth capital for the nation’s small and midsize businesses for more than 60 years. Established in 1953, the SBA’s philosophy and mission spring from agencies created in the 1930s and ’40s in response to the Great Depression and World War II. The SBA provides direct funding through some programs and functions as a guarantor of loans in others. The agency supported $30.25 billion in loans to small businesses in 2012, its second-largest total ever.
The SBA programs most relevant to small businesses are the MicroLoan Program and the 7(a) Loan Program. MicroLoans are small ($50,000 or less), short-term loans to small businesses and certain types of not-for-profit childcare centers. The 7(a) Loan Program provides start-up and existing small businesses with access to capital when they might not be eligible for business loans through other channels. Most U.S. banks and some non-bank lenders participate in this program, with the SBA generally guaranteeing up to 85 percent of loans up to $150,000 and 75 percent on larger loans. The maximum amount of a 7(a) loan is $5 million.
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