SBA Loans Explained – A 101 for Small Business Owners

The Small Business Administration is a wealth of information and resources for small businesses. The SBA knows that small businesses are the backbone of every community, but many business owners don’t qualify for traditional loans or face competition from larger corporations in finding financing. In order to level the playing field, the SBA has a loan program for entrepreneurs that give your small business more opportunities to find money for your company.

Understanding SBA Loans

One of the biggest myths about SBA loans is that the SBA makes the loan to entrepreneurs. It does not. What it does do is make a guarantee to the lender for the money. In a way, the SBA is like a co-signer on a personal loan. Because lenders have a reduced risk when lending money through the SBA lending program, it opens up the market for veterans, minorities, small business owners, and start-ups who don’t have the financial backing of a large corporation.

The Types of SBA Loans

The SBA has many different types of loans under the SBA loans umbrella. To get one of these commercial loans, you must go through an authorized SBA lender. The loan is structured much like a traditional loan. The difference is that is has the backing of the SBA.

When applying for financing, you will need to know how you intend to use the money, because that will determine which program is a fit for your needs. Ask your lender about these types of SBA loans:

  • 7a Loan – for Working Capital, Purchasing Equipment, or Refinancing Debt
  • Export-Assistance Loans
  • 504 Loans – for Real Estate or Equipment
  • CAPLine – Seasonal Working Capital
  • Microloans – Under $50,000
  • Disaster Recovery Loans

SBA loans have very favorable terms and rates, which is one of the key benefits to small business owners. However, your business does have to meet the qualification criteria for size, type of business, and lending requirements.  We will work with you to make sure you have all your ducks in a row so the SBA loan process isn’t quite as daunting as you may have thought it to be. Contact us at Davis Commercial Financing to learn more or begin your SBA loan process today.


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