Small Business Administration (SBA) Loans 

SBA Loan Types

7(a) Loans

SBA’s most common loan program, which includes financial help for businesses with special requirements.

What is a 7(a) loan?

The 7(a) Loan Program, SBA’s most common loan program, includes financial help for small businesses with special requirements. This is the best option when real estate is part of a business purchase, but it can also be used for:

  • Short- and long-term working capital
  • Refinance current business debt
  • Purchase furniture, fixtures, and supplies

Key eligibility factors are based on what the business does to receive its income, its credit history, and where the business operates. Your lender will help you figure out which type of loan is best suited for your needs.

 

Am I eligible?

To be eligible 7(a) loan assistance, businesses must:

  • Operate for profit
  • Be considered a small business, as defined by the SBA
  • Be engaged in, or propose to do business in, the United States or its possessions
  • Have reasonable invested equity
  • Use alternative financial resources, including personal assets, before seeking financial assistance
  • Be able to demonstrate a need for a loan
  • Use the funds for a sound business purpose
  • Not be delinquent on any existing debt obligations to the U.S. government

Some businesses may not qualify for a 7(a) loan. Read more about what the SBA considers an ineligible business.

 

How do I use the 7(a) loan?

Basic uses for the 7(a) loan include:

 

  • Long- and short-term working capital
  • Revolving funds based on the value of existing inventory and receivables
  • The purchase of equipment, machinery, furniture, fixtures, supplies, or materials
  • The purchase of real estate, including land and buildings
  • The construction a new building or renovation an existing building
  • Establishing a new business or assisting in the acquisition, operation or expansion of an existing business
  • Refinancing existing business debt, under certain conditions

7(a) Loans

Maximum loan amount $5 million
Maximum SBA guarantee 85% for loans up to $150,000 and 75% for loans greater than $150,000
Interest rate Lenders and borrowers can negotiate the interest rate, but it may not exceed the SBA maximum

7(a) Small Loan

Maximum loan amount $350,000
Maximum SBA guarantee 85% for loans up to $150,000 and 75% for loans greater than $150,000
Interest rate Lenders and borrowers can negotiate the interest rate, but it may not exceed the SBA maximum

SBA Express

Maximum loan amount $350,000
Maximum SBA guarantee 50%
Interest rate Lenders and borrowers can negotiate the interest rate, but it may not exceed the SBA maximum

SBA Veterans Advantage

Veteran-owned businesses are one of the fastest-growing and significant segments of the U.S. economy. SBA loans made to veteran-owned small businesses come with reduced fees.

To be eligible to receive fee relief through the Veterans Advantage program, a small business must be at least 51 percent owned and controlled by someone in one of the following groups:

  • Honorably discharged veterans
  • Active Duty Military service member eligible for the military’s Transition Assistance Program (TAP)
  • Service-disabled veterans
  • Reservists and/or active National Guard members
  • Current spouse of any veteran, active duty service member, Reservist, National Guard member, or the widowed spouse of a service member who died while in service or as a result of a service-connected disability

CAPLines

CAPLines is an umbrella program that helps small businesses meet their short-term and cyclical working-capital needs. It features four lines.

  • Seasonal CAPLine: Borrowers must use the loan proceeds solely to finance the seasonal increases of accounts receivable and inventory — or in some cases associated increased labor costs. It can be revolving or non-revolving.
  • Contract CAPLine: This line finances the direct labor and material cost associated with performing assignable contracts. It can be revolving or non-revolving.
  • Builders CAPLine: This line can finance direct labor and material costs for a small general contractor or builder constructing or renovating commercial or residential buildings. The building project serves as the collateral, and loans can be revolving or non-revolving.
  • Working CAPline: This is an asset-based revolving line of credit for businesses unable to meet credit standards associated with long-term credit. It provides financing for cyclical growth, recurring and/or short-term needs. Repayment comes from converting short-term assets into cash, which is remitted to the lender. Businesses continually draw from this line of credit, based on existing assets, and repay as their cash cycle dictates. This line generally is used by businesses that provide credit to other businesses. Because these loans require continual servicing and monitoring of collateral, additional fees may be charged by the lender.

With the exception of the Builders CAPLine, the maximum maturity on a CAPLine loan is 10 years. Builders CAPLine loans must not exceed five years. Holders of at least 20 percent ownership in the applicant business are required to guarantee the loan.

504 Loans

Long-term, fixed rate financing of up to $5 million for major fixed assets

What is the 504 loan program?

The CDC/504 Loan Program provides long-term, fixed rate financing of up to $5 million for major fixed assets that promote business growth and job creation.
504 loans are available through Certified Development Companies (CDCs), SBA’s community-based partners who regulate nonprofits and promote economic development within their communities. CDCs are certified and regulated by the SBA.

What is the 504 loan program?

To be eligible for a 504 Loan, your business must:

  • Operate as a for-profit company in the United States or its possessions
  • Have a tangible net worth of less than $15 million
  • Have an average net income of less than $5 million after federal income taxes for the two years preceding your application

Other general eligibility standards include  falling within SBA size guidelines, having qualified management expertise, a feasible business plan, good character and the ability to repay the loan.
Loans cannot be made to businesses engaged in nonprofit, passive, or speculative activities. For additional information on eligibility criteria and loan application requirements, small businesses and lenders are encouraged to contact a Certified Development Company in their area.

How do I use a 504 loan?

A 504 loan  can be used for a range of assets that promote business growth and job creation. These include the purchase or construction of:

  • Existing buildings or land
  • New facilities
  • Long-term machinery and equipment

Or the improvement or modernization of:

  • Land, streets, utilities, parking lots and landscaping
  • Existing facilities

A 504 loan cannot  be used for:

  • Working capital or inventory
  • Consolidating, repaying or refinancing debt
  • Speculation or investment in rental real estate

504 Loans

Maximum loan amount $5 million
Interest rate Lenders and borrowers can negotiate the interest rate, but it may not exceed the SBA maximum