SBA or Small Business Administration loans are meant to provide financial aid and security the small enterprises in the country. This was founded in the year 1953 and since then has catered to the financial needs of millions of small businesses across the US. The organization not only provides financial assistance to the small businesses but also counsel and protects their financial interests. SBA loans are offered to the enterprises that are otherwise considered to be ineligible for conventional loans.
The SBA loans are generated by the banks, financial institutions and lenders with the help of funds they receive from SBA. The SBA loans are available as both secured as well as unsecured – the ones that are protected by the real estate property as security are secured SBA loans and the ones that are not are known as unsecured. The two most popular types of SBA loans are as follows:
SBA 7(a) and SBA 7(a) Express Loans – This is the most popular SBA loan and is available in both secured and unsecured forms. The maximum loan amount for this loan is $2 million and the maximum loan term can go up to 25 years for the secured loans. The loan amount can be used for buying equipments and machineries, working capital, buying real estate etc. Qualifying for these loans is really easy and even the start up businesses as well as the new enterprises can avail them. The SBA is presently offering 90% guarantee on these loans, which has resulted in a number of companies offering these loans. These SBA loans have a variable rate of interest and business owners can start with low interest rates.
SBA 504 (CDC) Loans – These are long terms loans which are availed by the small businesses enterprises who want to buy real estate or other buildings. The present loan schemes offer a maximum loan amount of $5 million and the borrowers have to make 10% of the loan amount as down payment.
The application process for SBA loans is similar to the conventional loans and people can expect to face the same documentation and methodology that is followed for the conventional loans. The borrowers need to check the preferred loan program prior to applying for the SBA loans. The basic information that the borrowers will have to furnish are tax returns, financial statements, personal tax returns, personal financial statement, business debt schedule, schedule of real estate, personal resumes, photos of the property, business history, credit authorization, AR and AP aging lists, etc. More documents are also sought depending on the type of SBA loans applied.