What Are SBA Loans?

SBA Loans, or Small Business Administration Loans, are government-backed financial tools designed to support and empower small businesses. These loans provide entrepreneurs with access to capital they might not otherwise obtain through traditional financing channels. The U.S. Small Business Administration guarantees a portion of the loan, reducing the risk for lenders and making it easier for small businesses to secure funding. SBA Loans come in various types, such as the SBA’s 7(a) Loans, SBA Express Loans, Patriot Express Loans, and SBA’s 504 Loans. Let’s dive a little deeper into each of these four categories.

  1. SBA’s 7(a) Loan Program | Versatility

This program is designed to aid small businesses that are creditworthy but cannot qualify on their own for a conventional loan. The max loan amount is $5 million, and the US government will guarantee 50-90% of your loan.

The 7(a) Loan Program is by far the most flexible of their offerings, and it can be used for almost any legal business purpose, including:

  • Purchase/improve real estate
  • Equipment or inventory
  • Working capital
  1. SBA Express | Streamlined Solutions

This program provides eligible lenders the flexibility to use their own methods and protocols, reducing the SBA guarantee percentage in return (50% max). Lenders under the Express program are granted delegated authority, empowering them to independently handle the entire lifecycle of the 7(a) loan without needing SBA oversight – speeding up the overall process.

These loans are capped at $500,000 and can be used for the following:

  • Buying real estate
  • Refinance debt
  • Cover operating costs
  1. Patriot Express Program | Saluting Service

Open to veterans and eligible military members, this program is designed to offer the most expedited financing to start or expand a business. The loan maximum is $500,000, and the SBA will guarantee between 75-85% of the loan, depending on the amount.

Like the basic 7(a) Program, this Loan can be used for almost any legal business purpose, including:

  • Start-up or expansion costs
  • Equipment purchases & inventory
  • Working capital
  • Business-occupied real estate purchases
  1. SBA 504 Loans | Building Futures

Unlike the other programs, 504 Loans are meant to provide long-term, fixed-rate financing for major assets to promote business growth and or job creation. 504 Loans are available through Certified Development Companies (CDCs) and max out at $5.5 million – except for certain energy projects.

504 Loans can be used for:

  • Purchase or construction of new or existing buildings or land
  • Improvement of land, streets, landscaping, or existing facilities
  • Purchase of long-term machinery & equipment

504 Loans cannot be used for:

  • Working capital or inventory
  • Consolidating or refinancing debt
  • Speculation or investment in rental real estate

Picking Your Loan & Getting Started

Eligibility criteria vary by program and project or loan request. For more detailed information or assistance in selecting the best loan for your business, contact an SBA Loan Specialist at Mechanics Cooperative Bank. We’re committed to empowering entrepreneurs through these SBA Loan Program initiatives. If you’re ready to take your business to new heights, contact us today!

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