Overview of SBA Loan Programs
This article was adapted from information available at the U.S. Small Business Administration Web site
The Small Business Administration (SBA) is a federal government agency that offers a variety of loan guarantee programs, allowing banks and other private lenders to fund small businesses that can’t otherwise qualify for loans on reasonable terms. These lenders actually make the loans, and the SBA guarantees them; the SBA has no funds for direct lending or grants.
Currently, the SBA offers a variety of loan-guarantee programs designed to address diverse small business needs. The SBA imposes no limit on the total loan amount you can request from the lender, although it will guarantee only up to $750,000. Practically speaking, this means that the most you could expect from an SBA-guaranteed loan is approximately $1 million. Many loan programs are smaller and have lower guarantees. The maximum SBA loan maturity is 25 years, although smaller loans typically have shorter maturities.
If you want to speak to an SBA representative about any of the SBA’s loan programs, contact your local SBA office or call 1-800-8ASK-SBA (the SBA Answer Desk).
The following are brief descriptions of the major SBA loan programs currently available:
SBALowDoc and SBAExpress
These two loan programs each offer financing up to $150,000 and can approve your loan within 36 hours of receiving your completed application.
This is a pilot SBA loan program developed in collaboration with the National Community Reinvestment Coalition (NCRC) and its member organizations. Limited to selected NCRC lenders and specific geographic areas, it serves mostly small businesses in traditionally under-served “new markets.”
U.S. Community Adjustment and Investment Program (CAIP)
This program is designed to aid communities adversely impacted by The North American Free Trade Agreement (NAFTA). It is designed to encourage business development and expansion in these areas.
504 Certified Development Company (CDC) Program
A CDC is a nonprofit economic development corporation. CDCs work with the SBA and the private sector in specific geographic areas. There are about 290 CDCs nationwide. Loans must be used for fixed asset projects such as land and improvements. They may also be used for purchase of long-term machinery and equipment.
This is an umbrella program that has five types of loans to help small businesses meet their short-term and cyclical working-capital needs. Loans can be for any dollar amount (except as noted). The five loan types are as follows:
- Seasonal Line: Advances against anticipated inventory and accounts receivable
- Contract Line: Finances the direct labor and material cost associated with performing assignable contracts
- Builder’s Line: For small general contractors or builders constructing or renovating commercial or residential buildings
- Standard Asset-Based Line: Asset-based revolving line of credit for businesses unable to meet credit standards associated with long-term credit
- Small Asset-Based Line: Asset-based revolving line of credit of up to $200,000
This program is for businesses engaged in, or preparing to engage in, international trade, or for businesses adversely affected by competition from imports.
Export Working Capital
The Export Working Capital (EWCP) Program was designed to provide short-term working capital to exporters. A combined effort of the SBA and the Export-Import Bank, the EWCP uses a one-page application form and has a turnaround time of 10 days or less.
This program is designed to provide loan guarantees to eligible small businesses for the planning, design or installation of a pollution control facility.
The Defense Loan and Technical Assistance program is a joint SBA and Department of Defense effort to provide financial and technical assistance to defense-dependent small businesses adversely affected by defense cutbacks.
The Prequalification Pilot Loan Program uses intermediaries to assist prospective borrowers in developing viable loan application packages and securing loans. The maximum loan amount is $250,000.
Qualified Employee Trusts
This program provides financial assistance to Employee Stock Ownership Plans.
Developed to increase the availability of very small loans to prospective small business borrowers, Microloans range from under $100 to a maximum of $25,000. The average loan size is $10,000.