Yakima County Development Association - Tool Kit: Small Business Administration Loans

Jean Brown

Article by:
Jean Brown

Jean publishes a blog called the Enterprise Corner.  It features articles on entrepreneurship, local industry trends, manufacturing news and periodic ‘toolbox’ articles showcasing assistance, incentives and other resources for local businesses.



Tool Kit:  Small Business Administration Loans

Tool Kit: Small Business Administration Loans

September 10, 2014

The United States Small Business Administration (SBA) provides counsel and assistance to America's entrepreneurs and established businesses.  As part of its duties the SBA administers two popular loan programs, the 7A and CDC/504.  It also offers microloans through partners and administers disaster loans.  Let's take a look at SBA's two most popular lending programs

The SBA 7A program encourages small business lending by providing repayment guarantees to banks and lending institutions that make loans to small business.  Lender that use the 7A program get a 75-85% repayment guarantee.  Financial institutions must certify that they cannot do the loan without an SBA guarantee.  The SBA 7A program allows lenders to make more small business loans and often provide better terms for borrowers.  Small businesses can borrow from $25,000 to $5 million using the 7A program.  Interest rates are typically prime + 2.25-3.00% depending on loan amounts and terms.  To obtain an SBA 7A loan you will make a request through a participating bank.

alt textThe SBA 504 loan program provides financing for major fixed assets like equipment and buildings.  Under the 504 program the SBA actually funds a portion of the project in partnership with a commercial lender.  Typically a lender will fund 40-50 percent of the project and an SBA-designated Community Development Corporation will fund 35-40 percent of the project.  The borrower benefits because the SBA financing package typically lowers the equity they need to invest in the project.  Loan terms are often more favorable too.   Small businesses can borrow from $100,000 to $5 million using the SBA 504 program.  Interest rates on the 504 loans range from 4.5 to 6+ percent depending on loan terms.  To learn more about obtaining an SBA 504 loan visit www.evergreen504.com.

SBA loans have certain job creation/retention requirements.  Check with a bank or lender to determine eligibility.  Not sure which program is the best fit for you.  Here is a Comparison of SBA 7A and SBA 504 loans

Our webpages on start up funding and funding for established businesses contain information on SBA loans but are also chock full of helpful information and advice on funding options and requirements.  

Here are links to other helpful topics:  business plans -- licensing and permitting -- "Tool Box" Blogs

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