If you’re planning to start or expand a business, in addition to your own capital and money from friends and family, you may require outside financial assistance. The Small Business Administration (SBA) offers a number of loan programs designed for business owners who may have trouble qualifying for a traditional small business loan.

Each SBA approved loan provides for the SBA protecting the issuing bank or financial institution with a guarantee. This guarantee represents the portion of the loan that SBA will reimburse to the lender if a borrower defaults on their loan payments.

The lenders risk of default is mitigated by the SBA guarantee plus the borrower’s cash injection and collateral. With this backstop, authorized SBA lenders are more likely to approve loan applications that otherwise would be declined.

In addition to SBA loan application and documentation requirements, each SBA lender will have their own internal requirements when underwriting a SBA loan, typically focusing on a borrower’s credit history, collateral and capacity to repay the loan.

It is very important for a borrower to select the right SBA lending institution for their specific borrowing needs. Some of the most popular SBA lending programs include:

SBA 7(a) Loans:
Provides up to $5 million for starting or expanding a business, new construction or renovation, purchase land or buildings, equipment and fixtures or lease-hold improvements, working capital, debt refinance (for compelling reasons), seasonal line of credit or inventory. Generally, the working capital, machinery and equipment term is 5-10 years while a real estate loan matures in 25 years. SBA 7(a) loans provide lower long term stable payments with no balloon payments.

SBA 7(a) Express Loans / Veterans Advantage:
Provides up to $350,000 that may be used by a business owner as an easy to use revolving line of credit for up to seven years. Express Loans offer fast turnaround due to a streamlined application and approval process. Special benefits and advantages are offered to veterans, active duty military, reservists, or National Guard members or a spouse of any of these groups; or a widowed spouse of a member or veteran who died during service, or a service connected disability

SBA 504 Loans:
504 funds are offered to stable and growing businesses to finance large investments or projects, including new facilities, land, machinery and equipment. Provides up to $5.5 million of long-term, fixed rate funds to buy land, machinery, property and facilities. The lender portion is secured by a first lien on the project assets. SBA 504 loans are either 10 or 20 year term with a fixed interest rate with no balloon payments. A 10% to $20% down payment is required by the borrower. The down payment may be borrowed money and the loan fees may be financed.

International Trade and Export Funding:
Provide exporters and lenders with a streamlined method of obtaining financing for loans and lines of credit from $500,000 to $5 million. Use of funds include working capital, equipment, facilities, land, buildings, debt refinance, standby letters of credit. Lenders use their own credit decision process and loan documentation; exporters get access to their funds faster. SBA provides an expedited eligibility review with a response in less than 24 hours. Terms range from one to 25 years.

SBA CapLines:
Help small businesses meet their short-term and cyclical working-capital needs. Funds may be used for working capital, contract and purchase order financing, seasonal expenses, construction expenses and debt consolidation. Financing up to $5 million for up to 10 years, except for Builder’s CapLine which matures in 5 years.