Recently Becky asked me to help with some information about US Small Business Administration (SBA) programs. Here are a few basics everyone needs to know; first, SBA does not do direct lending except for disaster assistance. They also do not have grant funding.
What do they do? They offer a guarantee to a lender that helps small businesses qualify for longer term, better interest and they give the lender a degree of comfort on an otherwise risky loan. If your credit is horrible and the project or business idea you are trying to fund is not viable, this program won’t help you.
Here, just released from SBA is an excerpt from their latest BankNotes newsletter on the 504 Loan program.
Certified Development Companies can help small business qualify for SBA loans
Growing businesses are often unable to qualify for traditional financing because of the difficulty of coming up with a down payment of 30 percent or more. When a conventional loan is not possible, a 504 loan may be the answer. The SBA 504 Loan Program gives small business owners the following advantages: generally a lower down payment; below- market, fixed rate financing, which avoids the uncertainties or future market fluctuations; and a longer repayment term that brings debt service in line with the cash flow generated by the asset.
Virtually all types of for-profit small businesses are eligible for this program. Loans cannot be made to investment companies, or businesses engaged in speculation or investment in rental real estate.
The loans are for acquiring long-term fixed assets, such as land, buildings, machinery and equipment. Loans can also be used for building, modernizing, renovating or restoring facilities or purchasing long-term machinery and equipment
The SBA’s 504 lending intermediaries, Certified Development Companies (CDCs),serve your community to finance business expansion needs through the 504. CDCs are nonprofit corporations set up to contribute economic development in their local communities. CDCs work with the SBA and private sector lenders in a public-private partnership to provide financing to small businesses.
The maximum SBA debenture is: $1.5 million for regular 504 loans meeting the job creation criteria or a community development goal; $2.0 million for loans meeting certain public policy goals; $4.0 for manufacturing loans.
Information on all SBA programs can be found on their web site at www.sba.gov
This article is part of the Small Biz 100, a series of 100 practical hands-on posts for small business people and solo entrepreneurs, whether in a small town, the big city, or in between. If you have questions you’d like us to address in this series, leave a comment or send us an email at firstname.lastname@example.org. This is a community project!