Which SBA Loan is right for you?

Which SBA Loan is right for you?

SBA offers multiple SBA funding programs that foster the growth of small businesses. This government agency can provide loan guarantees of up to 85% of the loan amount. With the cooperation of SBA-approved lenders, startups can enjoy financial help from reliable fund sources. The two banner loan programs of SBA are the 7(a) and 504 loans. Both programs can help small business owners to grow or maintain their business. The best thing about these loans is that their interest rates are generally low compared to the outside market for loans, and are determined by the type of loan, amount, and repayment period. Their differences lie in the purposes for which it can be used. Learn more about how SBA loans can be used to know which SBA loan is right for you.

The advantages of an SBA 7(a) loan

The SBA 7(a) loan is one of SBA’s most popular loan program. Once a borrower takes out this type of loan, the fund can be used as working capital, purchase furniture, and fixtures. It can also be used to make leasehold improvements or acquire an existing business. If the 7(a) loan isn’t tailored to your needs, keep reading to determine which SBA loan is right for you.

The advantages of an SBA 504 loan

The SBA 504 loan is primarily for borrowers who want or need to finance the purchase of a land or existing buildings or make improvements to existing facilities. The fund can also be used to purchase equipment or ground-up construction commercial real estate. Note that the 504 program is inherently an economic development program. It aims to promote growth and job creation in the country.  When applying for this loan, the borrower might need to show the job creation opportunities that can be opened on the number of funds received.

The advantages of an SBA Express Loan

SBA Express loan lies under the umbrella of the 7(a) loan program. This type of loan offers a faster turnaround time. If you apply through this program, your completed application can receive a response within 36 hours. Express loans still follow the usual standards of the 7(a) loan program without the months of waiting for a response.  General 7(a) loans have a maximum fund at $5 million. The average loan amount in 2012 was up to $337,730. Know that interest rates vary depending from one deal to another. If the above loans don’t fit your criteria, there are other types of loans available. Keep reading to see if which SBA loan is right for you.

Other types of SBA loans

Aside from the famous 7(a) and 504 programs of SBA, there are other loan programs are also available for small business owners. They are as follows:

  • Disaster loans

This type of loan is intended to fund for the repair or replacement of items. Borrowers can apply for this loan if they have a real estate, personal property, machinery, and equipment that have been damaged or destroyed in a declared disaster or drought. You can also avail disaster loans for damage to inventory and business assets due to natural disasters.

  • Microloans

The average loan amount for a microloan is up to $13,000. This amount comes at a general interest rate between 8% and 13%. This type of loan can also fun up to $50,000 for working capital, inventory or supplies, furniture or fixtures, and machinery or equipment.

Deciding which SBA loan is right for you depends on your necessities as a small business owner. 7(a) and 504 program are the primary choices for the many, but you can also avail microloans or disaster loans as needed. Make sure to know what the requirements for an SBA loan are to get you started applying for any of the mentioned SBA loan programs.