2019-09-12 18:56:15

The U.S. Small Business Administration (SBA) does not issue loans directly to private businesses.

They partner with lenders who provide loans to small businesses — startups or existing businesses wanting to grow, expand or recover.

You may need funds to:

• Launch, grow or repair a startup business.

• Start or purchase a small business.

• Access revolving credit or working capital for day-to-day expenses.

• Purchase, renovate or expand facilities.

• Purchase inventory, equipment or machinery.

• Purchase land or real estate.

• Export a product or service.

SBA loans reduce a lender’s risk, enabling small businesses to have easier access to capital. Lenders will review an applicant’s business and finance plans and, when they have a strong sense the borrower is very likely to repay on time, they will strongly consider issuing the loan.

The SBA works with lending institutions and is familiar with their lending habits. If the SBA agrees with the lender on a small business loan, the SBA may offer benefits that include competitive terms, lower down payments, flexible overhead requirements and, in some cases, little or no collateral.

Business and finance plans

Not everyone is comfortable writing business plans or estimating expenses and income. You may have an idea to become a major player in the beekeeping business, for example, but don’t use Word, Excel or other computer programs. You may have many ideas in your mind and aren’t comfortable writing them on paper.

This is where SCORE can help. Contact us, or go to SCORE National website (score.org) and search the many workshops, blogs, articles and templates — all free to anyone.

Finding a lender

Many entrepreneurs use their personal funds to start a business, by tapping into savings, receiving family financial support or even money from private investors, but they may need outside financing.

An online search could provide data on local banks and lending institutions and even private investors. Monthly Tuolumne County Chamber of Commerce Mixers are attended by many local and established businesses that may provide insights.

SBA lender match website

How about searching for SBA-approved lenders? You will complete the SBA online lender match form on this site: SBA.gov/lendermatch. class=”Apple-converted-space”>

Need funding from private Investors? SBA partners with qualified private investors through their SBIC — Small Business Investment Companies. They are private lending companies licensed and regulated by the SBA. In addition to funding small business growth and more jobs, SBIC’s offers management expertise and assistance to companies.

SBA loan types

The key loans offered are the 7a, CDC/504, Micro, and specialty loans.

7a Term Loans

The 7a Term Loan is the most common type backed by the SBA. They typically are issued with restrictions to its use, such as for working capital or to refinance debt. The SBA secures between 75% and 85% of the loan for the lender, which results in an interest rate that is just slightly above the prime rate due to its government backing.

CDC/504 Term Loans

Certified Development Company Loans (CDC) are ideally used for purchases or improvements to fixed assets. The principal range on CDCs is from $1.5 million to $4 million. Unlike 7a loans, CDC’s are only 40% backed by the SBA, and an additional 10% comes from you, the borrower, in the form of collateral.

The interest rates on these types of loans are tied very closely to 5- and 10-year U.S. Treasury Rates, with only a slight premium. In addition, there’s a 3% fee attached to the loan, which most borrowers pay directly from the capital raised.

Micro Loans

The SBA takes a different approach with Micro Loans than it does with its other popular loans. With Micro Loans, the SBA does not back a lender in case of default. Instead, the SBA provides money to nonprofit organizations who lend to small businesses at their own discretion. As a result, the requirements for these loans vary greatly.

Specialty Loans

The SBA also offers many specialized loans that certain businesses can take advantage of. They have a wide variety of uses and restrictions and require unique qualifications to be issued.

Some of these specialty loans include: Military Veteran Express Loans, Disaster Recovery Loans, Export Express Loans, International Trade Loans and the new ARC loan.

504 Loans

504 Loans (aka Certified Development Company Program) are designed to provide financing for the purchase of fixed assets, which usually means real estate, buildings and machinery, at below market rates.

The Small Business Administration partners with Certified Development Companies (CDCs) to manage the SBA 504 loan program. CDCs are nonprofit corporations that promote economic development in their communities. Each CDC has a defined geographic area of operation. There are more than 260 CDCs throughout the U.S. CDCs work with participating lenders to connect eligible businesses with SBA 504 loans.

Tuolumne County SCORE (tuolumnecounty.score.org) offers 100% free and confidential business counseling to entrepreneurs wanting to open a small business and existing businesses. Contact us at ‘tuolumnecountyscore@gmail.com .


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