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What Is A SBA Loan?

It's simply a business loan that is guaranteed by a government agency called the Small Business Administration.  The SBA acts like an insurance agency for banks that lend small business capital.  If the borrower defaults on the loan, and the bank is not able to get their capital back by selling assets that were used as collateral for the loan, than the SBA gives/pays the funding bank the difference.  This guarantee makes small business lending much more interesting and profitable for banks.

The SBA was formed in an effort to help America grow by making capital more accessible to small business owners.  Traditionally, small business financing is one of the riskiest categories out there for lending.  Most banks for example, would never lend to a startup business, especially one without solid collateral.  With the backing of the SBA these loans close every day and startups like HP are given a chance to grow and create 1,000's of jobs.  

What Are The SBA Loan Programs?

There are several different types of SBA loans, such as the SBA 7a loan program, SBA 504 loan program, and various types of micro loans.  Loan amounts range from $5,000 or so up to $13,000,000. 

The most popular SBA loan program is the 7a loan which goes from approx. $150,000 to $5,000,000.  You can use the loan to finance commercial real estate, equipment, working capital, business goodwill, debt consolidation, inventory, etc.  This is one of the main benefits of the program; you can finance virtually anything with it.  Also, many banks will finance up to 90% of the total project costs with the 7a. 

The SBA 504 loan program is also a classic loan which is used to finance commercial real estate and equipment only.  Loan amounts range from $500,000 to $13,000,000 and the loan boasts low, long term fixed rates at 90% loan to value.  It’s one of the best loans for small business that want to purchase commercial real estate.

Micro loans are primarily used to finance working capital and inventory and generally only go up to $300,000 or so.

So, what is an SBA loan?  Its a small business loan that is backed, for the benefit of the funding bank and borrower, by the United States Government. 

  

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