Need funding for your small business? SBA loan programs might be the answer

Starting a small business takes time, hard work, and money. Depending on your type of business and your present financial situation, you may find you need to reach to outside sources for funding.

One resource you can turn to for assistance in obtaining a loan to start or grow your business is the United States Small Business Administration (SBA). While the SBA does not directly lend money to small businesses, it can facilitate loans with third party lenders. Various banks, credit unions, community development organizations, and microlending institutions throughout the U.S. partner with the SBA to provide funding to small businesses without access to other financing options with reasonable terms.

SBA sets specific guidelines for loans, which are made by its partners, and it guarantees that they’ll be repaid by the borrowers. This benefits small business owners by giving them access to much-needed funding, and it eliminates some of the risk to the lending partners.

To qualify for an SBA loan, your business must meet certain criteria regarding business size, financial standing, and others. You must also meet the credit qualifications of the lender.

Several advantages of SBA loans over conventional loans include:

• Lower down payments
• Longer repayment terms

Two SBA loan programs that benefit many small businesses are:

7(a) loan program

These loans can be used for various purposes (such as satisfying short-term or long-term working capital needs; purchasing equipment, machinery, and supplies; buying real estate; refinancing existing debt; and more).

Microloan program

This program provides loans up to $50,000 to help businesses with lower dollar financing needs. According to the SBA, the average microloan is approximately $13,000. You may not use microloans to pay existing debt, but you can use them for working capital and purchasing inventory, supplies, furniture, equipment, machinery, etc.

There are other SBA loan programs as well. For information about them, visit the SBA website’s Loan Programs page. You can also find more details about obtaining financing for both start-ups and existing small businesses on the SBA website’s Borrowing Money For Your Business page.

If you want to explore more potential sources of financing for your business, check out the SBA’s Loans and Grants website page. And consider reaching out to your local SCORE Chapter to speak with a mentor who can direct you to lending institutions and organizations in your community. They can also help guide you as you prepare to approach lenders for funding.

Since 1964, SCORE “Mentors to America’s Small Business” has helped more than 10 million aspiring entrepreneurs and small business owners through mentoring and business workshops. More than 11,000 volunteer business mentors in over 320 chapters serve their communities through entrepreneur education dedicated to the formation, growth and success of small businesses. For more information about starting or operating a small business, call 1-800-634-0245 for the SCORE chapter nearest you. Visit SCORE at www.score.org.