Fund Your Dream Business in 2020: The Best Types of SBA Loans for Startups

Fund Your Dream Business in 2020: The Best Types of SBA Loans for Startups

Did you know that there are almost 30 million small businesses in the United States? If you are about to start your own business or looking at how to apply for a small business loan, why not learn about the different types of SBA loans, to see if you qualify for any of them.

You might be surprised about what you learn.

What Is an SBA Loan?

SBA stands for Small Business Administration. An SBA loan is a low-interest, long term loan for a small business. These are granted by the government agency to small businesses that qualify for the loan.

7(a) Loan

A 7(a) loan is one of the most popular types of SBA loans because of their flexibility and the terms they provide. With this type of loan, a small business owner can borrow up to $5 million.

The term of the loan varies between 10-25 years, depending on your needs. The interest rates are negotiable which is always a plus.

With a 7(a) loan you do not have too many limitations. You can use the money for equipment, working capital, to expand your business, or for the acquisition of a business.

Microloans

If your business does not need to borrow a large amount then a microloan might be best. The SBA Microloan program is for loans up to $50,000.

If you are going to set up a non-profit organization you can also apply for a microloan to help pay for any startup costs.

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CDC/504 Loan

This is a long-term loan meant for larger expenses like real estate or machinery. If you are looking to renovate your building or buy a new one then this is probably the type of loan you will need.

The loan amount can be up to $5.5 million. The maturity period is between 10-20 years. Keep in mind this loan type is not meant to be used as working capital.

Qualifying for an SBA Loan

In order to qualify for an SBA loan, you have to be located and operating in the United States. You also have to have a stable personal credit score of 650 or higher.

Depending on the type of loan, you will need to have been in operation for a certain amount of time. You might also have to show profits and a strong revenue record along with a business plan in place, showing financial projections for the next three to five years.

Now You Are Familiar With the Different Types of SBA Loans

As you can see you have options thanks to the different types of SBA loans. Now the questions are, what do you qualify for and what is the best option for your needs? Once you are approved make sure to use your funds responsibly and follow through on your end of the loan agreement.

Did you find our blog post helpful? Please bookmark our business section to stay in the know with all things business.

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