The SBA offers a variety of financing options for small businesses. The SBA’s assistance usually is in the form of loan guaranties, – i.e., it guarantees loans made by banks and other private lenders to small business clients. Generally, the SBA can guarantee up to $750,000 or 75% of the total loan value, whichever is less. The average size of an SBA-guaranteed loan is $175,000, and the average maturity is about eight years.
Whether you are looking for a long-term loan for machinery and equipment, a general working capital loan, a revolving line of credit, or a “microloan,” the SBA has a financing program to fit your needs.
Note: The SBA has a portfolio guaranteeing over $27 billion in loans to 185,000 small businesses that otherwise would not have had such access to capital. It guaranteed over 60,000 loans totaling $9.9 billion to America’s small businesses in fiscal year 1995. It also gives management and technical assistance to nearly 1 million small businesses through its 950 Small Business Development Centers and 13,000 Service Corps of Retired Executives volunteers.
The 7(a) Loan Guaranty Program, financing that can satisfy the requirements of almost any new or growing small business. The SBA offers a number of specialized loan and lender delivery programs.
The 7(m) MicroLoan Program(very small loans to small businesses.)
CAPLines – short-term lending for short-term needs.
Export Working Capital and International Trade loans short- and long-term financing for exporters.
DELTA – loans to fund defense conversion.
Pre-qualified Loans for Minorities and Women loan packaging support and the SBA’s commitment before going to a lender.
SBA Express (FA$TRAK) – Increased lender authority to provide an SBA guaranty on small loans no extra paperwork, no waiting for SBA approval.
The Certified and Preferred Lenders Program faster service through licensed lenders.
The 7(a) Loan Guaranty Program
The 7(a) Loan Guaranty Program is the SBA’s primary loan program. The SBA reduces risk to lenders by guaranteeing major portions of loans made to small businesses. This enables the lenders to provide financing to small businesses when funding is otherwise unavailable on reasonable terms.
The eligibility requirements and credit criteria of the program are very broad in order to accommodate a wide range of financing needs.
When a small business applies to a lending institution for a loan, the lender reviews the application and decides if it merits a loan on its own or if it requires additional support in the form of an SBA guaranty. SBA backing on the loan is then requested by the lender. In guaranteeing the loan, the SBA assures the lender that, in the event the borrower does not repay the loan, the government will reimburse the lender for its loss. By providing this guaranty, the SBA helps tens of thousands of small businesses every year get financing they would not otherwise obtain.
To qualify for an SBA guaranty, a small business must meet the 7(a) criteria and the lender must certify that it could not provide funding on reasonable terms except with an SBA guaranty. The SBA can then guarantee as much as 80% on loans of up to $100,000 and 75% on loans of more than $100,000. In most cases, the maximum guaranty is $750,000 (75% of $1 million). Exceptions are the International Trade, DELTA and 504 loan programs, which have higher loan limits.