5 Types of SBA Loans to Help Your Small Business

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There are several sorts of SBA loans available to help your small business. A significant percentage of each loan is guaranteed by the Small Business Administration.

The lender’s risk is minimised, which encourages them to provide financial money and resources to small firms. Your small firm might obtain millions of dollars with an SBA loan and a repayment schedule of up to 25 years.

Determine why your firm requires a loan and which loan would be most beneficial to you as a small business owner. The most common SBA loan kinds to support your small business are listed below.

 

1. Standard SBA 7(a) Loans

 

The most popular type of loan is an SBA 7(a) loan. Typically, this loan is utilised to fund the start-up of a business. You can also utilise this loan to purchase new land or inventory and supplies.

You can use this loan to repair existing assets, refinance debt, or expand your firm if you are authorised. To be considered, you must have a solid credit score and a successful business history.

In most cases, you will be required to put up collateral in order to obtain finance. With interest rates as high as 10%, you can make anywhere between $30,000 and $5 million.

Repayment durations are usually limited to ten years. If it’s a real estate loan, though, you’ll have 25 years to return it.

 

2. CDC/SBA 504 Loans

Next, apply for a CDC/SBA 504 loan if you want to buy or build owner-occupied commercial real estate. A bank/traditional lender and a community development corporation will be assigned to you (CDC).

The bank will typically lend up to 50% of the required funds, while the CDC will provide up to 40%. The remaining costs must be paid in full, usually as a cash down payment.

Earn up to $20 million over a 25-year repayment period. The bank can charge interest of up to 9.75 percent, whereas the CDC can charge interest of up to 2.9 percent.

You must own at least 51% of the commercial property and have a credit score of 680 or higher to qualify for an SBA 504 loan.

 

3. SBA Express Loans

Second, to help your small business, you can apply for an SBA quick loan. These are smaller rapid business loans, but they have a faster approval process. Within 36 hours, the SBA will respond to your request.

Express loans can be used for the same things that an SBA 7(a) loan can. This loan could be used to fund business expansion, inventory, or new land, for example.

You can take out a loan of up to $350,000. You and the lender can also negotiate the interest rate, but it cannot be higher than 50%.

You may not be needed to offer collateral depending on the amount borrowed. If you need money immediately, an SBA express loan is a good option.

 

4. International Trade Loans

You can also qualify for an international trade loan if you are involved in international trade (ITL). These loans are intended towards the acquisition, construction, improvement, and modernization of facilities and equipment in the United States.

These establishments typically manufacture goods or services for international trade. To be eligible, you must be a for-profit US-based firm and be eligible for a typical SBA 7(a) loan.

You must have a stable financial situation and decent credit. In addition, your company must meet the SBA’s basic size requirements.

With an interest rate of up to 9.25 percent, you can earn up to $5 million. You have up to 25 years to repay the loan, depending on the reason.

 

5. Economic Injury Disaster Loans

Finally, to get your small business out of financial trouble, apply for an economic injury disaster loan (EIDL). This loan will help you cover your operating costs until you are able to recover from the calamity.

Severe storms, flooding, hurricanes, and wildfires are examples of disasters. An EIDL and a physical disaster loan can reward you up to $2 million depending on your economic injury.

Whether or if your company has incurred property damage has no bearing on your financing. In addition, you will only have to pay up to 4% interest every year.

Your ability to repay the loan will, of course, decide the length of your repayment period. If your small business requires disaster aid, you should definitely apply for an EIDL.

 

In Summary

There are several sorts of SBA loans available to help your small business. In truth, small business loans can be used in a variety of ways.

To fund your business, purchase land, or repair existing assets, apply for an SBA 7(a) loan. Of course, if you need a loan quickly, apply for an SBA expedited loan.

Within 36 hours, you will receive a response to your application. You should also apply for a CDC/SBA 504 loan if your small business intends to buy or build commercial real estate.

If you have been harmed by international commerce or if you require funding to support your international production of products and services, apply for an international trade loan.

Finally, to help your small business during a period of unforeseen hardship, ask for an economic injury calamity loan. There are a variety of SBA loan options available to help your small business.

Komolafe Timileyin is a passionate entrepreneur that loves to solve entrepreneurial issues. He is also a blogger and an upcoming Engineer.

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