What Types of SBA Loans are Available?
If your small business has been turned down for a commercial loan through normal lending channels, the SBA offers several types of loans.
7(a) loans are the most common SBA loans because they are a "general purpose" type of loan. According to the SBA, financing can be used for "working capital, machinery and equipment, furniture and fixtures, land and building (including purchase, renovation and new construction)," and other general business purposes. There are several types of 7(a) loans, including special programs for veterans, exporters, and other unique circumstances.
Loan Details: $2 million maximum, with a term no longer than 25 years. Interest rates can be fixed or variable, pegged to the prime rate, LIBOR, or other rate.
The CDC/504 Loan Program is designed for small businesses that need "brick and mortar" financing, including funds for construction, building and street improvements, machinery and equipment, and other capital needs.
Loan Details: $1.5 million maximum in most cases; $2 million when meeting a "public policy goal." Terms are either 10 or 20 years. Interest rates are pegged to a level above the current market rate for five-year and 10-year U.S. Treasuries.
This program is designed for small businesses and not-for-profit child-care centers that need funds for inventory, supplies, furniture, fixtures, or other equipment.
Loan Details: $35,000 maximum, with a term no longer than six years. Interest rates typically vary between 8 and 13 percent.
The SBA's newest loan program provides interest-free short-term relief for small businesses (not startups) struggling to make principal and interest payments on existing debt. At present, ARC loans will be offered as long as funding is available or until September 30, 2010, whichever comes first.
Loan Details: $35,000 maximum, interest- and fee-free. Repayment can extend up to five years.
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