SBA programs for small enterprises

Author: Austin Fog

SBA stands for Small Business administration. The SBA defines small businesses broadly as those with fewer than 500 employees, and startups as those in business for a year or less. The SBA was formed in 1953 by congress to help the USA entrepreneurs to start and run small business enterprises.

Among the services offered they also provide loans to small business organizations.

According to the SBA requirements, the partners who lend these loans, as SBA does not provide loans direct from SBA, but that has guaranteed for these partners and that has been structured according to them. This in return reduces the risk for both parties. Only those without any other form of access to loans will fall into the eligibility criteria of it.

Reasons why you need an SBA loan:

  • Purchasing a business
  • Expanding your existing business
  • Purchasing commercial real estate, including land and buildings
  • New construction buildings
  • Improvements to existing commercial buildings
  • Purchasing new or used equipment, supplies, machinery, etc.
  • New business development if you’re just getting started
  • Long-term and short-term working capital.
  • Long-term and short-term debt consolidation.

If you’re seeking a loan due to unforeseen circumstances—like a natural disaster—you can use a disaster loan for:

  • Personal property repair or replacement (homeowners and renters are eligible)
  • Home property repair or replacement
  • Business property repair or replacement
  • Economic injury (businesses eligible)
  • Military reservists’ economic injury.

Four Major categories of SBA loans:

General small business loans 7 (a)

The 7(a) loan program is the SBA's primary program for providing financial assistance to small businesses. The terms and conditions, like the guaranty percentage and loan amount, may differ by the type of small business administration loans.

  • The standard 7(a) allows a maximum amount of loan of $5 million. It states that the maximum SBA guarantee percentage would be 85 percent for loans up to $150,000 and 75 p percentage for loans greater than $150,000. Lenders and borrowers can negotiate the interest rate, but they may not exceed the SBA maximum. As per the eligibility decision, the qualified lenders are given delegated authority to make eligibility determinations without SBA review. It has up to 10 years of a revolving line of credit with 5 – 10 business days of SBA turnaround time. The application procedure needs SBA Form 1919 and SBA Form 1920 are required for every loan. For loans over $350,000, the SBA needs that the lender collateralizes the loan to the maximum extent possible up to the loan amount. Lenders are not asked to take collateral for loans up to $25,000. The credit decision can be taken by the qualified lenders who are given delegated authority to make credit decisions without SBA reviews.
  • The 7(a) small loan allows a maximum amount of loan of $350,000. It states that the maximum SBA guarantee percentage would be 85 percent for loans up to $150,000 and 75 p percentage for loans greater than $150,000. Lenders and borrowers can negotiate the interest rate, but they may not exceed the SBA maximum. As per the eligibility decision, the qualified lenders are given delegated authority to make eligibility determinations without SBA review. It has up to 10 years of a revolving line of credit with 5 – 10 business days of SBA turnaround time. The application procedure needs SBA Form 1919 and SBA Form 1920 are required for every loan. For loans, up to $25,000 Lenders are not required to take the collateral. For loans amounting over $25,000, up to and including $350,000, the lender must follow the collateral policies and procedures that it has established and implemented for its similarly-sized non-SBA-guaranteed commercial loans. The lender is not required to take a lien against an applicant’s real estate when the equity is less than 25% of the fair market value. The lender may limit the lien taken against real estate to the loan amount. The credit decision can be taken by the qualified lenders who are given delegated authority to make credit decisions without SBA reviews.
  • The SBA Express allows a maximum amount of loan of $350,000. It states that the maximum SBA guarantee percentage is 50%. Lenders and borrowers can negotiate the interest rate, but they may not exceed the SBA maximum. As per the eligibility decision, it is taken by the lender.

It has Up to seven years with maturity extensions permitted at the outset of a revolving line of credit with 36 hours of SBA turnaround time. The application procedure Lender primarily uses own forms and procedures, plus SBA Form 1919.

Lenders are not required to take collateral for loans up to $25,000. Many use their existing collateral policy for loans over $25,000 up to $350,000.

  • The Export Express allows a maximum amount of loan of $500,000. It states that the maximum SBA guarantee percentage is 0% for loans of $350,000 or less, 75% for loans more than $350,000. Lenders and borrowers can negotiate the interest rate, but they may not exceed the SBA maximum. As per the eligibility decision, it is taken by the lender. It should not exceed seven of a revolving line of credit with 24 hours of SBA turnaround time. The application procedure Lender primarily uses own forms and procedures, plus SBA Form 1919.

Lenders follow collateral policies and procedures that the lender has established for its non-SBA-guaranteed loans.

  • The Export Working capital allows a maximum amount of loans of $5 million. Export Working Capital loans are for businesses that can generate export sales and need additional working capital to support these sales. Lenders review and approve applications and submit the request to the U.S. Export Assistance Center location servicing the exporter's region. It states that the maximum SBA guarantees percentage of is90%. Lenders and borrowers can negotiate the interest rate, but they may not exceed the SBA maximum. As per the eligibility decision, qualified lenders may be granted authorization to make eligibility decisions. It should fall in terms of 12 months or less of a revolving line of credit with 5 – 10 business days of SBA turnaround time. The application procedure SBA-EIB 84-1, plus attachments are required.

Export-related inventory and receivable generated by export sales financed with EWCP funds. The SBA also requires the personal guarantee of owners with 20% or more ownership. The credit decision is made by the SBA.

  1. Micro loans
  2. Real Estate and Equipment Loans: CDC/504
  3. Disaster Loans

Conclusion:

Each of these categories has its terms and will require an individual application. Although the SBA does not provide grants to help a business start or grow, there are several government grants available for non-commercial organizations like non-profits and educational institutions.

Use the governmental financing search tool to find out what funding loan is available for your type of business or look into other ways to secure funding for your small business administration loans if you do not fall into the category of those mentioned above.