Ricky Nave, Author at Axiom Alpha

Small businesses need capital for many different purposes to expand or maintain their operations, and the SBA offers a multitude of different loan types for different purposes and for different types of companies. SBA loans are organized into 4 main categories: 7(a) Loans, 504 Loans, Microloans, and Disaster Loans. As a rule of thumb, 504 loans are best for large real estate or equipment loans, 7(a) loans are best for business acquisitions or large working capital amounts, Microloans are best for startups, and Disaster Loans are best for emergencies. Those categories are broken down into 19 specific loan types, and the key details of each loan type are summarized in the table below. Some details of the loans such as interest rates and fees are dependent upon the specific SBA lending partner and your own financial situation, so I recommend first finding the loan type most applicable to your situation from the table below and then contacting at least 3 different lenders about that specific type of loan to compare the deals you can get before making a decision to accept funding. Loan TypeUse of FundsMax Loan AmountKey Eligibility RequirementsOther DetailsMicroloanAllowed- Working capital- Inventory- Supplies & materials- Furniture & fixtures- Machinery / equipmentNot Allowed- Purchase real estate- Pay existing debts$50,000Must be a for profit business or non-profit childcare center with a U.S. presence, but most other eligibility requirements are determined by the specific lender.Terms up to 6 yearsSBA Microloan Program Info PageSBA Search by State for Microloan LendersStandard 7(a)Allowed- Working capital- Refinance current eligible business debt- Supplies & materials- Furniture & fixtures- Purchasing land or real estate for owner-occupied commercial use- Construction or renovation of commercial real estate for owneroccupation- Establishing a new business- Acquiring, operating, or expanding an existing business* Any acquired business must generally be profitable and haveexisted for at least 2 years.Not Allowed- Purchase an investmentproperty$5 million- Be a for profit business- Be a "small business"by SBA definition (varies by industry)- Engaged in U.S. business- In an eligible industry - "Reasonable" invested equity- Not deliquent on any existing debts to U.S. gov- No non-SBA funding available- Generally, business owner(s) should have at least a 680 credit scoreTerms- Up to 10 years for equipment, working capital, or inventory loans- Up to 25 years for real estate loansYou must apply through an SBA partnered private lender.Qualifying can be difficult.SBA 7(a) Loan Program OverviewTop 100 SBA 7(a) Lenders7(a) Small LoanSubstantially the same as standard 7(a) uses$350,000Take an easy SBA pre-screening to be fast-tracked for approval. If you fail the fast track, you'll have to go through the more intensive standard 7(a) processLenders may not advertise this as separate from 7(a) lending but may instead simply use the fast-track 7(a) small application whenever you apply for under $350k7(a) SBA ExpressSubstantially the same as standard 7(a) uses$350,000Determined by lenderSBA Express Website7(a) Export ExpressAllowed- Develop export business- Participate in a foreign trade show- Translate product literature for use in foreign markets- Finance specific export orders- Finance expansions, equipment purchases, inventory, or real estate acquisitions related to business exports$500,000- All standard 7(a) requirements, plus- Business has been in operation at least 12 monthsMay be a term loan or revolving credit lineSBA Export Express Fact Sheet7(a) Export Working Capital Program (EWCP)Allowed- Manufacturing costs of goods for export- Purchasing goods or services for export- Support Standby Letters of Credit to act as bid or performance bonds- Finance foreign accounts receivable$5 million- All standard 7(a) requirements, plus- Business is engaged in export or can provide a valid plan to expand business into export activitiesLoan maturities typically 12 months or lessSBA Export Working Capital Fact Sheet7(a) International Trade Loan (ITL)Allowed- Working capital related to entering or expanding into foreign markets- Purchase, construct, renovate, modernize, improve, or expand facilities or equipment in the U.S. to produce goods or services involvedin foreign trade- Refinance existing debt with unreasonable terms & conditions (including any debt qualifying for refinancing under the standard 7(a) program)$5 million- All standard 7(a) requirements, plus- Prove that the loan will allow the business to expand or develop an export market OR demonstrate that the business has been adversely affected by import competition and that the ITL will improve its competitivenessTerms- Up to 10 years for equipment, working capital, or inventory loans- Up to 25 years for real estate loansSBA International Trade Loan Fact Sheet7(a) Seasonal CAPLineFinance seasonal increases in accounts receivable, inventory, & possibly labor (but NOT to maintain activityduring the slow periods)$5 million- All standard 7(a) requirements, plus- Business has been operating for at least one year- Need to demonstrate a pattern of seasonal activityTerms- Up to 10 years(but can be renewed at any time before maturity)SBA Overview of CAPLine Programs7(a) Contract CAPLineFinance the cost of one ormore specific contracts, subcontracts, or purchaseorders$5 million- All standard 7(a) requirements, plus- Show a specific contract or subcontract which needs financing and in which significant performance has not already begunTerms- Up to 10 years(but can be renewed at any time before maturity)SBA Contract CAPLine Program Info (Insider Info Lenders Use to Vet Your Application)7(a) Builders CAPLineDirect expenses related to the construction and/or substantial renovation of a specific eligible project (residential or commercial building)$5 million- All standard 7(a) requirements, plus- Demonstrate a specific eligible project Terms- Up to 5 years(but can be renewed at any time before maturity)SBA Overview of CAPLine Programs7(a) Working CAPLineAllowed- Short term working capitalNot Allowed- Paying deliquent taxes (e.g. state or sales taxes)- Purchasing fixed assets$5 millionSame as standard 7(a) requirementsTerms- Up to 10 years(but can be renewed at any time before maturity)SBA Overview of CAPLine ProgramsCDC/504 LoanAllowed- Long-term fixed assets for expansion or modernization- Purchasing commercial real estate for owner occupation- Machinery / equipment- Refinancing large equipment- Refinancing owner-occupied commercial real estate- improving or modernizing existing facilities- improving or modernizing land, streets, utilities, parking lots, or landscaping (with limits)Not Allowed- Working capital or inventory- consolidating, repaying, or refinancing debt- speculation or investment in rental real estate$5 million - Be a for profit business- Engaged in U.S. business- Tangible net worth under $15 million- Average annual net income (after federal income taxes) of less than $5 million for prior 2 yearsTerms- 10 years- 20 years- 25 yearsOnly available through CDCs (Certified Development Companies). Here is the SBA's official search engine to find CDCs near you.SBA 504 Loan Info Page504 Loan for eligibleenergy-efficient or manufacturing projectsSubstantially the same as standard 504 Loan above$5.5 million- All standard 7(a) requirements, plus- Project must reduce building energy usage by 10% or offset energy usage by 10% with renewablesSubstantially the same as standard 504 Loan aboveBusiness Physical Disaster LoanAllowed: Repair or replace any of the following past insurance coverage:- real property- machinery / equipment- fixtures- inventory- leasehold improvementsNot Allowed- business expansion- machinery or equipment upgrades$2 million- Businesses and most private non-profits may be eligible- Business is located in a declared disaster area- Demonstrable physical damages beyond what insurance coversTerms up to 30 yearsSBA Physical Disaster Loan Info PageDisaster Mitigation Assistance LoanRebuild a stronger business with mitigation improvements to prevent or reduce damage from future disasters20% over Business Physical Disaster Loan AmountSame as Business Physical Disaster LoanThis loan is an add-on to the Business Physical Disaster Loan with essentially the same terms.Economic Injury Disaster Loan (EIDL)Allowed- Working capital- Normal expenses (e.g. continuation of health care benefits, rent, utilities, and fixed debt payments)Not Allowed- covering lost income or profits- to be used in lieu of regular commercial debt- refinancing long term debt- business expansion$2 million- Businesses and most private non-profits may be eligible- Business is located in a declared disaster area- Demonstrable economic injury (i.e. show that the business is unable to meet its obligations and pay its ordinary and necessary operating expenses)Terms up to 30 yearsSBA EIDL Info PageNOTE: The COVID-19 EIDL program is similar but notably different than the standard EIDLMilitary Reservist Economic Injury Disaster Loan (MREIDL)The same as the normal EIDL above$2 million (limit may be raised by SBA if business is a substantial employer)Business is unable to meet its ordinary and necessary operating expenses because an essential employee was called to active duty in their role as military reservistTerms up to 30 yearsSBA Military Reservist Loan Info Page7(a) Community Advantage Loan (Pilot Program)Substantially the same as the normal 7(a) uses$250,000Similar to standard 7(a) requirements, but more flexible to serve mission-driven companiesSubstantially the same as the standard 7(a) terms, but with different lenders usually who may be more lenient and focused on community-serving organizations.Program ends September 30, 2022.Veterans Advantage ProgramThe Veterans Advantage Program is not a single type of loan but rather a loan program than can apply to most of the loans previously mentioned.Same or higher than non-veteran version of the loan typeBusiness is at least 51% owned by one or more individuals who are: honorably discharged veterans, active duty military eligible for TAP, active reservists, active national guard members, or current spouse or widow of any of the above or of someone who died or was disabled in serviceSBA Veterans Advantage Fact Sheet19 Types of SBA Business Loans