How to Finance a Small Business with an SBA Loan
Business Loans to Startups Available from the SBA
Mar 5, 2009
Owning a small business is the essence of the American dream. But how does the prospective business owner get the funding he or she needs to start their new business? Thankfully, the Small Business Administration (SBA) offers a range of loan options to help get small businesses off the ground and running strong.
SBA Small Business Loan Options: The Basic 7(a) Loan Guaranty
The primary business loan program of the SBA is the Basic 7(a) Loan Guaranty. The Basic 7(a) loan Guaranty helps qualified small businesses obtain a loan when deemed ineligible for other loan options through normal lending channels.
Business owners can use the Basic 7(a) Loan Guaranty for most typical business expenditures including machinery, equipment, fixtures, furniture, land and building, debt refinancing, working capital, and leasehold improvements. Loan maturity is up to 25 years for fixed assets and 10 years for working capital.
Other SBA Small Business Loan Options
Other SBA Loans include the Certified Development Company (CDC: a 504 Loan Program) and the Microloan (a 7(m) Loan Program).
The CDC provides business owners with long-term, fixed-rate financing to acquire real estate, equipment, or machinery for modernization or expansion. This loan is suited for small businesses requiring “brick and mortar” financing.
The microloan provides business owners with a short-term loan of up to $35,000. The purpose of this loan is to provide financing for the purchase of supplies, inventory, furniture, machinery, fixtures, equipment, and working capital. This loan is suited for small businesses in need of small-scale financing for startup or business expansion.
Financing a Small Business
When business owners are ready to finance their small business, they should point their web browser to the Small Business Administration website and follow these guidelines:
- On the top row of tabs, select Services > Financial Assistance to go to the Financial Assistance page.
- Take the free online course, “Finance Primer: Guide to SBA's Loan Guaranty Programs.”
- On the right-hand side of the Financial Assistance page, click through the following links to learn about SBA financing: Intro to SBA Finance, Basics, and SBA Loans.
- On the right-hand side of the Financial Assistance page, click Loan Application > Forms to go to the Forms page.
- Click Financial Assistance Forms to go to the Financial Assistance Forms page.
- Click 4 Application for Business Loan to download the PDF form to the user’s computer.
- Submit the completed SBA Application for Business Loan to the lender of choice.
Small businesses represent the heart and soul of the American economy. For the person considering a slice of the American dream and starting their own business, a small business loan from the SBA may be just the thing to get the new business off the ground and running.
See related articles, "Small Business Ideas," "How to Start a Business," and "How to Purchase Individual Health Insurance."
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