What Are the Different Types of SBA Loans?

One of the most important steps in starting your small business is securing capital to finance your initial outlays for your location, stock, fixtures, equipment, and more. Starting capital can also cover operating expenses during the early period while you are working to improve your income.

The Small Business Administration (SBA) offers many loans to help businesses get off the ground. However, the different types of loans are designed for specific circumstances, and it’s important to know which type fits your situation. Failing to understand what type of SBA loan is best for your business can mean either getting into legal trouble by using loan funds improperly or missing out on favorable terms. This brief guide can help you understand the complexities of SBA loans, though it’s recommended that you consult someone, such as a small business lawyer, before applying for an SBA loan.

types of SBA loans

How to Qualify for SBA Loans

The SBA loan program has several requirements you must meet to qualify for lending. When talking to a lender, they may reveal more specific requirements, but in general terms, your business must:

  • Be for-profit
  • Be physically located in the US
  • Do business in the US
  • Have sound credit
  • Have exhausted other financing options

If you meet these requirements, you might be able to get an SBA loan.

7(a) Loans

Most SBA loans fall under the 7(a) loan program. These loans can be used for a variety of purposes, including:

  • Real estate
  • Working capital
  • Refinancing business debt
  • Purchasing and installing machinery and equipment
  • Purchasing furniture, fixtures, and supplies
  • Change of ownership

7(a) loans take their name from the fact that they are authorized by Article 7(a) of the Small Business Act of 1953. Below are the types of 7(a) loans available.

Standard Loan

Standard SBA loans are for an amount from $500,000 to $5 million that don’t fit other SBA loan types. The SBA can guarantee up to 75% of the loan amount, and the loan can be approved by an SBA-approved lender within 5-10 business days. You will negotiate the interest rate with the actual lender, but it cannot be higher than the SBA approved maximum. Collateral requirements depend on the amount being financed, but it may include personal property as well as that owned by the business.

The standard SBA loan doesn’t allow for revolving credit, though there are several types of loans within the SBA system that do.

Small Loan

The SBA’s small loan program allows expedited approval, lax terms, and greater guarantees for smaller loans. SBA small loans can be approved in as few as two days. The maximum amount for a small SBA loan is $500,000. The SBA can guarantee up to 85% of the loan amount for loans up to $150,000, but for larger amounts, the guarantee is only the same as the standard loan.

Rates are negotiated between your business and the lander, not to exceed the SBA maximum. No collateral is required for loans of $50,000 or less. For larger amounts, you will negotiate collateral requirements with the lender, but your loan cannot be turned down just because you lack collateral.

small business attorney

Express Loan

As the name implies, SBA express loans are quick. They can be approved in as little as 36 hours. However, these loans can only be up to $500,000 and the SBA only guarantees up to 50% of the loan amount.

However, the Express loan does allow for revolving lines of credit for up to 10 years.

CAPLines Loan

CAPLines loans are a group of loans intended to help businesses meet short-term and cyclical capital needs. This can include loans focused on seasonal needs or needs related to construction or rehabilitation of buildings for resale. These loans have a maximum duration of 10 years.

Export Working Capital Program (EWCP) Loan

These loans are designed to help businesses that can potentially generate export sales but need additional capital to achieve this goal. The loans can be for up to $5 million and may be up to 90% guaranteed. Businesses can also get assistance from local US Export Assistance Centers.

EWCP loans can include lines of revolving credit for up to 36 months.

Export Express Loan

The Export Express Loan Program is intended for loans supporting exports that are smaller than the EWCP loans. Export Express Program loans can’t exceed $500,000. These loans can be up to 90% guaranteed if for $350,000 or less, and no collateral is required for loans up to $50,000

These loans can include revolving lines of credit for up to seven years.

International Trade

These loans are intended to help current exporters improve their competitive position, or to develop new export markets. These loans can be used to acquire, construct, renovate, modernize, or expand facilities and equipment at their US facilities. They can also use it to help them develop and penetrate foreign markets. They can even use the loan as working capital for export transactions.

These loans can be up to $5 million and can be up to 90% guaranteed by the SBA.

504 Loan

504 loans are different from the other types of SBA loans because they aren’t authorized under the same provision as 7(a) loans. They are also focused on different types of investments, so they aren’t as flexible.

The 504 loan program provides long-term, fixed-rate financing for major fixed assets. The intent is to support business growth and job creation.

To qualify, your business must meet all SBA loan requirements. Plus, the business must have a tangible net worth of less than $20 million and an average net income of less than $6.5 million.

small business lawyer

Need Help Applying for an SBA Loan?

As with anything related to the government, there is a significant amount of complexity in terms of paperwork and legal requirements when applying for an SBA loan. A small business lawyer can provide valuable assistance during the application process.

Elizabeth Lewis is a small business lawyer who has been helping businesses in the Denver area since 2010. She is dedicated to helping businesses succeed, and she can provide assistance with many aspects of qualifying your business for an ABA loan, including:

Elizabeth’s results-oriented approach helps you cut through the complexities to focus on the essential aspects of applying for an SBA loan. She has done this for many businesses and knows what makes a winning strategy.

To get help completing your SBA loan application, please contact the Law Office of E. C. Lewis in Denver.