Ins and Outs of Small Business Administration Loans

Are you looking to start a franchise but not sure where to get the money from? The United States Small Business Administration can help with their variety of SBA loans. They’re guaranteed by the federal agency, which allows lenders to offer them with flexible terms and low interest rates. Getting one can help you grow your business without taking on possibly crippling debt.

Here is a list of the different SBA loans that you can apply for to start off your business:

7(a) – The SBA’s flagship program. Offers federally guaranteed term loans of up to $5 million. Funds for working capital, expansion, equipment purchases. And processed through banks, credit unions, specialized lenders

504 – Offers federally guaranteed term loans of up to $5 million.  Funds for buying land, machinery, facilities and is processed through private-sector lenders and nonprofits

Microloans – Loans of up to $50,000. Funds for working capital, inventory, equipment, starting a business and is processed through community-based nonprofits.

Disaster Loans – Loans of up to $2 million. Funds for small-business owners affected by natural disasters and other emergencies and is processed through the SBA

The SBA can guarantee up to 85% of its loans of $150,000 or less and 75% of loans of more than $150,000. The agency says its average loan amount was about $375,000 in 2016. The program’s maximum loan amount is $5 million.

How do I get an SBA loan?

The best place to start is the SBA website, which includes a loan application checklist. Use this to gather your documents, including your tax returns and business records.

Here are some of the documents you’ll need before applying:

  • SBA’s borrower information form
  • Statement of personal history
  • Personal financial statement
  • Personal income tax returns (previous three years)
  • Business tax returns (previous three years)
  • Business certificate or license
  • Business lease
  • Loan application history