SBA Loans for Startups

SBA loans for Startups

When it comes to starting a small business from scratch, the primary question that comes to mind might be ‘how do I finance a startup business?’ While there are many unsecured business loans for startups, they are known to be hard to come by. It’s a good thing that SBA loans for startups are available to utilize.

The SBA loans for startups have become more popular every year. In 2013, there were only 31% of the total SBA 7(a) loans given out to startups. Four years later, the percentage went up to 38%. In 2018, those numbers increased to 44%. Those numbers show that there are more SBA loans for startups opportunities each year.

Types of SBA loans for startups

Check these four main SBA loan types to see which one suits your needs best:

  • SBA 7(a) Loans

Talk about the most popular form of SBA loan, and you’ve got SBA 7(a) loans. This one is best for people who need working capital. Its maximum loan amount is up to $5 million. Startups with a plausible business model like franchises can make this one of the best options that there is. For more information about this type of SBA loan, check our article on SBA 7(a) loans program.

  • SBA Express Loans

For startups that only need amounts up to $350,000, an SBA Express Loan is an excellent option. This type of loan is a form of an SBA 7(a) loan. As this loan has less risk than its counterparts, many lenders are more likely to approve this one. In 2017, there were 46% of SBA Express loans given out for startups.

  • SBA Microloans

The SBA microloan program aims to help non-profit intermediary lenders cater to small businesses. If you think you only need $50,000 to start your business or non-profit childcare center, this type of SBA loan for startups might be the best for you. It’s the only SBA program where the agency doesn’t guarantee the loans.

  • SBA 504 Loans

Get an SBA 504 loan if you need money for the owner-occupied real estate. Have your business off the ground by accessing up to $5 million worth of funds. You can use this money for financing a real estate that you can use as a warehouse, manufacturing facility or office. For more information about this topic, feel free to look up our article on SBA 504 loans.

Are SBA loans for startups hard to get? How much is down payment required for an SBA loan?

SBA loans for startups are the same as the traditional SBA 7(a) loan. The only difference is that they are relatively more difficult to qualify for since there’s a higher risk for the lender. It’s still possible to get these types of loan, yet you need to secure a higher percentage of the down payment. SBA lenders usually require up to 25-30% as down payment along with additional collateral.

To choose from the SBA loans for startups, you have to determine how much money you need. Knowing if you’re eligible for your chosen loan program is also advisable. SBA also requires applicants for these types of loan to have a detailed business plan. To know more about the SBA loan requirements, you can check our article about this matter.