SBA loan helps local card store open new locations
"Commercial Finance Partners provided funding for us to open new locations."
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Small Business Loans

Small Business Loans are available through the Small Business Administration (SBA). The Small Business Administration is a government agency that guaranties loans to banks and financial institutions. While the SBA does not directly lend any money it provides a guaranty to financial institutions that originate loans under the SBA guidelines.

The SBA offers several small business loans including the 504 loan program which can be used to acquire fixed assets for expansion, however, not for working capital or inventory. This SBA guaranty may be used to facilitate the purchase of machinery & equipment, real estate or the improvement of existing property. Borrowers need to have a minimum of 10% of the total project cost to be eligible for a 504 SBA loan.

Another type of SBA guaranty is the 7(a). The underwriting for this type of guaranty is based on the borrowers ability to repay the loan from cash flow. The SBA will also want to see positive equity, collateral and good management in order to be eligible for small business loan. There are several 7(a) programs including export, rural business and other special purpose programs that can assist borrowers with the purchase, expansion or operation of a business.

In addition to the 504 and 7(a) programs, the SBA also offers a micro loan program where companies can borrow up to $50k. Proceeds can be used for inventory, fixed assets and working capital, however, not to pay purchase real estate.

There are other options for businesses that need a small business loan in the private finance market, however, at much higher rates. While SBA loans are typically 6% - 7% over the Wall Street prime rate, small business loans can range from the high teens to mid twenties depending on the credit risk.

While SBA loans are designed to help borrowers obtain financing when they otherwise would not have been able to, the guidelines to be approved for an SBA loan can be difficult.

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