Interest rates vary with the type of loan you apply for.Ī general 7(a) loan may suit your business's needs best, but the 7(a) program also offers several specialized loans. The money can be paid back over as long as 25 years for real estate and equipment and 10 years for working capital. Still, you can expect to pay a one-time guarantee fee, which the agency charges the lender and allows the lender to pass on to you.Īn SBA 7a loan can be used for many business purposes, including real estate, expansion, equipment, working capital and inventory. SBA policy prohibits lenders from charging many of the usual fees associated with commercial loans. For loans that are less than $150,000, the maximum guarantee is 85 percent of the total loan amount. The SBA does not lend money itself, but provides maximum loan guarantees of up to $5 million or 75 percent of the total loan amount, whichever is less. The SBA offers a wide variety of loan programs for businesses at various stages of development.

After all, you can't ask the government to back you if you're not willing to back yourself. If you own 20 percent or more equity in the business, the SBA asks that you personally guarantee the loan. The most basic SBA eligibility requirement for SBA loans is the ability to repay the loan from cash flow, but SBA lending also looks at personal credit history, industry experience, or other evidence of management ability, collateral, and owner's equity contributions. Applications submitted by regular lenders are reviewed by the SBA in an average of two weeks, certified SBA lender applications are reviewed in three days, and approval through a preferred SBA lender is even faster. If the bank approves you, it submits your loan package to the SBA. The SBA can help you prepare your small business loan package, which you then submit to banks. In fact, the SBA does not actually make direct loans instead, it provides an SBA guaranteed loan to entrepreneurs, promising the bank to pay back a certain percentage of your loan if you are unable to.īanks participate in the SBA program as regular, certified, or as an SBA preferred lender. Of course, that doesn't mean the SBA is giving money away. In addition, many SBA loans are for smaller sums than most banks are willing to lend. As a result, some SBA loans have less stringent requirements for owner's equity and collateral than do commercial loans, making the SBA an excellent financing source for startups. The federal government has a vested interest in encouraging the growth of small businesses. Where can you go when private financing sources turn you down for a business loan? For the small business owner, the answer is typically the U.S.

Small business administration