| Loan Programs From The US Small Business Administration |
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The U.S. Small Business Administration (SBA) offers a few loan programs for new and small businesses that are not able to obtain funds on reasonable terms through normal lending channels. The loan programs are presented through private-sector lending institutions that provide loans which are, in turn, guaranteed by the SBA- the organization does not involve itself directly.
This makes an SBA loan far less risky for a lending institution than other types of loans given without this kind of guarantee. The following are the brief descriptions of three types of loan programs available through the SBA. 7(a) Guaranteed Loan Program This is the primary loan provided by the SBA. It is a small business loan intended for newly set-up business ventures to buy the equipment and supplies, and to deal with short- and long-term expenditures related to the establishment of the business. This type of loan may also be utilized for real estate purchases. The SBA guarantees a 7(a) loan up to 80 percent for amounts of $100,000 or less and 75 percent for amounts over $100,000. 504 Certified Development Company Loan Program Another type of SBA loan, the 504 Certified Development Company Loan Program, provides funds to small businesses to buy land, equipment, machinery or other goods and resources for a long-term and at a fixed rate of interest. These loans are supervised by the office of Certified Development Companies (CDC). The loan amount for these loans is normally contributed by through several lenders, typically 50 percent by a lending company, 40 percent by the CDC and the remaining 10 percent by the business owner. To obtain this type of SBA loan, borrowing businesses have the obligation to create and retain jobs in the country. Microloan Program The SBA also offers a smaller loan alternative for businesses who do not qualify for conventional small loans from a financial institution. The Microloan Program offers funds from several hundred dollars up to a maximum of $25,000. These funds can be used to acquire equipment, inventory, machinery and other supplies or in the form of working capital. These funds may not be used to pay for any existing arrears of the business, nor can these funds be used to buy real estate. These loans are available through nonprofit organizations known as intermediary lenders that are affiliated with the SBA The main benefit of applying for the SBA loans is that these loans are offered without much requirement of credit history and collaterals. Therefore, you can easily get these loans in case you intend to start a new venture or expand an existing small business. Related Articles
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