The Small Business Administration is known for providing access to business loans for small companies and startups, but what type of loans? What is the range for each? That’s where a deeper understanding of the programs available to you is important, because many SBA loans cover more than you might think, based on their names.
Multi-Asset Loans: The 504 Program
504 loans are designed to group assets together so you can make one deal to finance the whole lot. That has made them popular with startups because it means getting a small shop and all your vital equipment with one down payment and one monthly loan payment. Franchise investors can also use these loans to cover franchise licensing fees alongside equipment and facilities, but the franchise has to be in the white-listed directory available from the SBA.
It’s also important to remember that you can use a 504 loan to buy a single asset. That gives you the chance to get a piece of real estate at a very good interest rate even if you do not want to buy a lot of equipment. Similarly, if there’s one big machine you need and the rest of the shop is handled, the 504 loan might be your best option because of its low interest rates and long repayment terms.
7a Loans for Real Estate
You can also buy real estate with a 7a loan, which was designed specifically for commercial properties. These SBA loans have shorter repayment terms and higher interest rates than 504 loans, but they can be used for more than just a purchase. You can also use 7a loans to cover property improvements or to refinance properties you already own. That makes them very useful for companies like hotels and motels that need to keep updating to stay competitive.
The SBA also offers small loans for working capital, without any need for collateral. Companies can get up to $50,000 to use for operational expenses, inventory purchases, or short-term needs like building maintenance or equipment repair. Microloans can have terms up to six years, which makes the monthly cost lower than most other working capital loans, and there is no prepayment penalty.
Finding the Right SBA Loan for Your Business
There are a few other specialized types of SBA loans out there to learn about, like disaster recovery loans. For most small business owners, though, these three loans are flexible enough to provide you with the resources you need to open or to keep expanding. The next step is to check out the current requirements for SBA loans in each category, so you know what you need before you apply.