There are several types of SBA loans. It really depends on what you need the loan for. Let's say you're purchasing commercial property, then you would use an SBA 504 Loan. You can learn more about that here: SBA 504 Loan Buy Commercial Real Estate With SBA CDC Loans
The most common type of SBA loan is the 7(a), which can be used for working capital, debt, real estate, or even equipment. You need to make sure to choose the right one, so that you don't miss out on potential benefits for your business.
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A lender would expect you to repay the loan from the business' cash flow. You should be of good character and never have been convicted of a felony. The SBA normally looks for management capability, collateral pledged and owner's equity contribution as part of the loan deal. In case you own 20% or greater of the company, you will be required to personally guarantee the loan.
<span>When it comes to starting a business or even financing your existing business there are a few options for types of loans that you can consider. They all have both positive and negative sides to consider but having all the information that you can get is the most important thing you can do. The three most popular business loans are SBA loans, lines of credit loans and revolving lines of credit.</span><br>SBA loans are loans that are made through local banks and the money borrowed can be used for a variety of purposes like equipment or furniture. The application process for these loans can be a bit difficult and are hard to qualify for because they want to guarantee that they will be getting the money back.<br>Line of credit loans are short-term that are normally used as operating cash because they are relatively small amounts of money that are deposited into your account and can be used on a need basis. For these loans you pay interest based on how much you borrowed and the money has some limitations like it cannot be used to buy property or equipment. If you do take out a line of credit loan you are going to want to pay it back promptly because late fees and interest can make them get expensive quickly.<br> Revolving lines of credit loans are similar to those of line of credit loans only when you pay back the borrowed amount the lender will allow you to borrow the same amount again. These loans are good for business that are using loans to purchase inventory and build their cash flow.
A lender would expect you to repay the loan from the business' cash flow. You should be of good character and never have been convicted of a felony. The SBA normally looks for management capability, collateral pledged and owner's equity contribution as part of the loan deal. In case you own 20% or greater of the company, you will be required to personally guarantee the loan.
Fees involved with SBA 504 loan; SBA fees, approximately 2.5% of SBA portion of the loan and secondly the lender fees, negotiated with the lender, but usually 1-2% on lender loan.
An SBA loan is a loan that has been guaranteed by the U.S. Small Business Administration. The guarantee assures the lender that it will be repaid a part of the money it loans in case the borrower fails to repay it. The SBA will guarantee up to 85% on loans of $150,000 or much less and as much as 75% on loans over $150,000. With few exceptions, the maximum SBA guarantee is $1 million.
Under the guarantee theory, lenders make and manage the financing. The business applies to a lender for financing. The lender comes to a decision if they may make the loan internally or if the loan application has some flaws which, in their opinion, will require an SBA guarantee if the loan is to be made. Under this program, the borrower remains obligated for the entire amount due.
The SBA grants lenders like CDC what's known as "preferred lender status" which enables us to approve small business financing without talking to the Small Business Administration. Lenders need to make loans to entrepreneurs they feel be capable to service your debt, and don't want to must see the Small Business Administration for payment. Therefore, considerable scrutiny continues to be worked out within the approval process.
The Small Business Administration programs are made to encourage commercial loan companies to create financial loans to business proprietors and entrepreneurs. The Small Business Administration doesn't make direct loans, however they have many loan guarantee programs that may be very advantageous to companies.
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