Small Business Association Loans
The US Small Business Administration (SBA) offers small businesses access to loans on advantageous terms. SBA’s7(a) loan guaranty program allows loans up to $250,000 to finance fixed assets such as land and building, working capital, debt consolidation, and other purposes, besides financial specific needs such as reducing environmental impact. The SBA offers the creditor guarantee for 85 percent for loans up to $150,000 and 75 percent for loans greater than $150,000.
SBA Employee Trusts program provide financial assistance for companies to launch Employee Stock Ownership Plans, and comply with Employee Retirement Income Security Act (ERISA).
The SBA CAPLines program helps small businesses meet their short-term and cyclical working capital needs. Such loans come in five lines:
- Seasonal Line, to finance seasonal increases of accounts receivable, inventory, and labor costs
- Contract Line, to finance direct labor and material cost associated with performing assignable contract
- Builders Line, for builders and general contractors to renovate direct labor and material costs in commercial or residential building projects
- Standard Asset-Based Line that serves as a line of credit to finance cyclical growth, recurring and/or short-term needs.
- Small Asset-Based Line, or an asset-based revolving line of credit up to $200,000
SBA’s International Trade Loan Program guarantee term loans up to $1.75 million for small exporters to acquire or develop capital generating long-term assets. SBA Export Express Program provides term loan or revolving line of credit to small exporters with less than 20 employees, to finance specific export orders or standby letters of credit, attend foreign trade shows, fund product brochures in foreign languages and other specific export related purposes. SBA’s Export Working Capital Program (EWCP) facilitates credit to finance working capital advances on export orders, and export receivables or letters of credit. Normal banks usually do not extend assistance for these activities. SBA and Exim Bank Co-Guarantee Program provide small exporters with export working capital loans up to $12,000,000 with collateral support.
SBA and Credit Development Company’s 504 loan program provides small enterprises with net worth below $7 million and net profits below $2.5 million access to long-term, fixed-rate financing enjoyed by larger firms, at interest rates equivalent to favorable bond market rates. Stipulations allow purchase and improve land, machinery, and utilities, construction of new facilities or modernization old facilities, and payment of soft costs such as architectural and legal fees, environmental studies, and appraisals with such loans.
SBA’s Microloan Program provides short-term loans up to $50,000 to small concerns and certain not-for-profit child-care centers, to meet costs of inventory, supplies, furniture, fixtures, machinery, or equipment, and to meet working capital requirements
One important point of note is that the SBA does not disburse loans directly. To avail SBA loans, approach a local bank or lending institution that participates in SBA programs.