If you’ve read our previous post, “Need a loan? The Small Business Administration can help." you’re familiar with some of the reasons why the United States government guarantees loans to small businesses. The next step is to decide which of the SBA’s five loan types that best fit your needs.

 

SBA 7(a) loan

  • The 7(a) loan is the basic SBA loan; designed to finance established small businesses.
  • It can offer access to more capital with longer terms and, in many cases, improved cash flow.
  • Flexible and ideal for general business purposes and operational expenses, such as:
    • Purchasing or expanding a business
    • Working capital, improvements, or refinancing
    • Equipment, including machinery and vehicles
    • Furniture and other office essentials such as printers, fixtures, and more
    • Purchase, refinancing, build, or renovate commercial property
  • Advantages:
    • Longer maturity and easier qualification than conventional loans
    • Lower down payments
  • Loan Maturity:
    • Up to seven years for working capital
    • Up to 10 years for equipment and business acquisition
    • Up to 25 years for real estate
  • Maximum loan amount: 
    • $5 million

 

SBA Express loan

  • This loan is generally used for equipment and working capital. Connect with your business banker or loan specialist to learn more.
  • Ideal for:
    • Working capital
    • Purchasing equipment
    • Financing vehicles or inventory
  • Advantages:
    • Longer maturity than some conventional loans
    • Easier qualifications than a conventional loan
  • Loan Maturity:
    • Up to seven year-term with first-year revolving option and balance amortized across the remainder of the term for working capital
    • Up to 10 year term for equipment
  • Maximum loan amount:
    • $350,000

 

SBA Microloan

  • This is a very small, short-term loan, typically offered to new and growing small businesses and to certain types of not-for-profit child care centers.
  • For microloans, you may need to fulfill training or planning requirements designed to help you launch or expand your business in order to be considered eligible.
  • Ideal for:
    • Working capital
    • Supply and inventory purchases
    • Equipment, including machinery and vehicles
    • Furniture and other office essentials such as printers and fixtures
    • Partner buyouts
  • Cannot be used for:
    • Debt repayment
    • Real estate
  • Maximum repayment term is six years and varies based on:
    • Amount
    • Plans for the funds
    • Needs of the borrower
    • Specific lender requirements
  • Maximum loan amount:
    • $50,000
    • Average loan: $13,000

 

SBA 504 loan

  • Primarily used for real estate and equipment, this loan offers long-term, fixed-rate financing for major assets, including land and buildings.
  • To qualify:
    • Net worth of your small business should be less than $15 million
    • Net income cannot exceed $5 million after taxes for each of the previous two years
    • SBA covers 40% of total cost, lender covers up to 50%, and borrower puts up the remainder
  • Ideal for:
    • Buying land
    • Financing long-term machinery
    • Purchasing existing buildings
    • Building or renovating facilities
    • Refinancing debt (must be connected to business expansion)
  • Cannot be used for:
    • Working capital or inventory
  • Advantages:
    • Longer maturity and easier qualification than conventional loans
    • Lower down payments or fixed assets
  • Loan maturity:
    • Up to two years on interim construction period
    • 7 to 10 years on equipment
    • 10 to 20 years on real estate
  • Maximum loan amount:
    • $350,000 minimum, no maximum

 

SBA Disaster loan

  • Designed to help businesses damaged, destroyed or affected in a declared disaster, a disaster loan offers low interest rates.
  • Can be used for repairing or replacing business assets such as:
    • Real estate
    • Machinery
    • Equipment
    • Inventory
  • Maximum loan amount:
    • $2 million
  • Following a presidential disaster declaration, a Disaster Loan Application and IRS Form 4506-T must be submitted directly to the SBA. The following information will be required:
    • Contact information
    • Social Security number
    • Federal Emergency Management Agency(FEMA) registration number
    • Deed or lease information
    • Insurance information
    • Income, account balance, monthly expenses, and other financial information
    • Employer identification number (EIN) for business applicants

 

Learn more about Small Business Administration Loans through Bank of America.1

 

 

1All programs subject to credit approval and loan amounts are subject to creditworthiness. Some restrictions may apply. The term, amount, interest rate and repayment schedule for your loan, and any product features, including interest rate locks, may vary depending on your creditworthiness and on the type, amount and collateral for your loan. Bank of America may prohibit use of an account to pay off or pay down another Bank of America account. Repayment structure, prepayment options and early payoff are all subject to product availability and credit approval. Other restrictions may apply.

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