There are numerous loan programs authorized by the Small Business Administration. The two most popular programs are known as a SBA 7A and SBA 504 loan. Both have different parameters and are very beneficial for the business community.
SBA loans are available for small businesses as defined by the SBA. Professional practices such as doctors, lawyers, architects and accountants are all considered small businesses.
The SBA 504 loan is utilized for the financing of land, including existing buildings, inclusive of improvements such as grading, street improvements, utilities, parking lots and landscaping. The purchase of long-term machinery and equipment. All real estate will need to be owner occupied to a minimum of 51%.
The SBA 504 loan in many situations allows for a capital infusion by a borrower to be as low as 10%.Due to the structure of the loan this type of loan can be used for projects as high as $12,500,000.00. Please note this is an approximate figure as project size is a function of the capital infusion of the borrower and other underwriting parameters.
SBA 7A loans are the most basic and most used type loan of SBA’s business loan programs. SBA 7A provides loans to businesses; so the requirements of eligibility are based on specific aspects of the business and its principals. As such, the key factors of eligibility are based on what the business does to receive its income, the character of its ownership and where the business operates.
The size of the SBA 7A loans are smaller than the those for the SBA 504 loans and can be used for far more varied purposes other than a long term hard asset, such as working capital long or short term and inventory purchases just to name a few. The SBA maximum loan size is $5,000,000.00.