Types of SBA Loans
Depending on the needs of your business, the Small Business Administration has several SBA loan programs options to provide you with access to the financing you need to expand and grow. Since First Commonwealth Bank has met several key requirements, as set by the SBA based on our experience, reputation, and regulatory compliance, we have acquired the designation of 'SBA Preferred Lender.' This means we can simplify and expedite the SBA loan-approval process and we have the authority to make the final credit decision on any type of SBA loans.
Loans guaranteed by the SBA range from small to large and can be used for most business purposes, including long-term fixed assets and operating capital. Here are the most common types of SBA loans.
SBA 7(a) Loans
The 7(a) loan program is the Small Business Administration's (SBA) primary program for providing financial assistance to small businesses. When you apply for an SBA 7(a) loan, you will work directly with your banker to prepare the required documents, and then the SBA participates by guaranteeing a portion of the loan amount.
The terms and conditions, like the guaranty percentage and loan amount, may vary by the type of loan. The maximum loan amount is $5 million with a maximum SBA guarantee percentage of 85% for loans up to $150k and 75% for loans greater than $150k.
These types of SBA loans are often used to purchase equipment, inventory, and business essentials or to free up working capital
CDC/SBA 504 Loans
The 504 Loan Program provides small businesses with long-term, fixed-rate financing which will be used to acquire fixed assets for modernization or expansion. 504 loans are made available through Certified Development Companies (CDC's), SBA's community-based partners for providing 504 Loans. A CDC is a nonprofit corporation that exists to promote economic growth and development specifically through 504 loans. Through these partnerships between CDCs, the SBA and community lenders (typically banks), small business owners have greater access to financing which creates community development.
For this type of SBA loan, you can borrow up to $5 million, and the proceeds from this type of SBA loan must be used for fixed assets and certain soft costs, but cannot be used for working capital or inventory, consolidating or repaying debt, or refinancing. Some of the primary benefits of a 504 loan are up to 90% financing, fixed-rate interest rates and savings that can improve your cash flow.
SBA CAPLines Lines of Credit
CAPLines is an umbrella program that helps small businesses meet their short-term and working-capital needs by utilizing various Lines of credit features. The maximum maturity on a CAPLine loan is 10 years, except for a Builders CAP Line. To qualify for this type of SBA loan, holders of at least 20% ownership in the applicant business are required to guarantee the loan.
SBA Export Loans
The SBA Export Express loan program gives exporters and lenders a streamlined method to get SBA-backed financing for loans and lines of credit up to $500,000. Lenders will use their own credit decision process and loan documentation, and the SBA will respond to applications with 24 hours.
A franchise is a business model where one business owner (the “franchisor”) sells the rights to their business logo, name, and model to an independent entrepreneur (the “franchisee”). Restaurants, hotels, and service-oriented businesses are commonly franchised. Two common forms of franchising are product/trade name franchising and business format franchising. The SBA has loan options available for a franchise opportunity, and we would love to talk more with you about the options. We also have an educational guide available for you to download for more details.
Getting Started with Your SBA Loan Today
Since there are several types of SBA loans, we’d love to learn more about your business to truly understand what option is best for your financial situation. Connect with our team of SBA lenders today to get started or call 800.711.BANK(2265).