While it would be nice to think you can get “free” money from the Small Business Administration (SBA), that’s really not the case. The SBA does offer loan programs, though most funding doesn’t come directly to you, even if approved; it will have to come through a local bank, credit union or nonprofit financial institution.
The three most popular SBA loan programs are the 7(a) Loan Program, the 504 Loan Program and the 7(m) Microloan Program. Here’s a quick breakdown on each.
The most popular SBA loan for small businesses is the 7(a) Loan Program. Eligible applicants can receive up to $750,000 guaranteed in part by the SBA. These loans can be used to buy business assets, business improvements or can be used as working capital. Each partner or business owner with at least 20 percent ownership must also guarantee the loan to be eligible.
Another popular SBA loan is the 504 Loan Program which is designed for the purchase of purchasing equipment or land. These loans are usually given by a local bank and backed by a Certified Development Company (CDC). They are then guaranteed by the SBA for up to 40 percent of the value of the purchase to $1 million. This program design protects the lender from possible default since the loans are backed by the CDC and SBA.
The SBA 7(m) Microloan program is the another of the most popular SBA lending programs, however, political pressure may eliminate this funding before long. Designed to offer loans up to $35,000 to be used for starting or growing a business, these funds do come directly from the SBA, although community non-profits manage the loans and deal directly with the business owner.
While SBA funding may be facing some cuts, there is still funding available for small businesses through this outlet. Visit the SBA website to learn more and see what options might work for you.
