sba & usda lending
The SBA (Small Business Administration) works with lenders to provide loans to small businesses. The agency doesn’t lend money directly to small business owners. Instead, it sets guidelines for loans made by its partnering lenders, community development organizations, and micro-lending institutions. The SBA reduces risk for lenders and makes it easier for them to access capital. That makes it easier for small businesses to get loans.
SBA PROGRAMS
SBA 7(a) Loans
Maximum SBA Guaranty $3,750,000 with a maximum Loan of $5,000,000. Reduces risk to lenders by guaranteeing large portions of loans made to small businesses.
Eligible Uses of Proceeds
- • Business Acquisition
- • Business Expansion
- • Business Start up costs
- • Working Capital
- • Inventory Purchases
- • Franchise Purchase
- • Refinance Existing Business Debt
- • Commercial Real Estate Purchase
- • Equipment, Machinery & Inventory
Interest Rates
- • Rate may be fixed or variable.
- • The Lender sets the rate not to exceed SBA maximums.
- • Higher rates are permitted on loans less than $50,000.
- • SBA 7(a) loans have no prepayment penalty unless the term is 15 years or longer. (Prepayment penalty 5%, 3%, 1%; for years 1-3).
SBA 504 Loans
The 504 Program helps fund long-term, fixed-asset loans (real estate and large equipment), provided in conjunction with Certified Development Companies (CDCs) which are licensed by the SBA.
Funds may be used to purchase and install equipment or construct, refinance or improve owner occupied commercial real estate.
Project Costs Financed
- • Non-guaranteed financing by Lender secured by first lien on project assets (50% of total project)
- • SBA funds a debenture for the remaining portion of the project (typically 40%)
- • Equity of 10% plus additional 5% if new business or special use property
CAPLines
The CAPlines program, for loans up to $5 million, is designed to help small businesses meet their short-term and cyclical working capital needs.
Use of Proceeds
The programs can be used to:
- • Finance seasonal working capital needs;
- • Finance the direct costs of performing certain construction, service and supply contracts, subcontracts, or purchase orders;
- • Finance the direct cost associated with commercial and residential construction; or
- • Provide general working capital lines of credit that have specific requirements for repayment.