SBA Financing

Posted on February 28, 2017

The U.S. Small Business Administration (SBA) 504 Loan or Certified Development Company program is designed to provide financing for the purchase of fixed assets, which usually means real estate, buildings and machinery, at below market rates. As part of it mission to promote the development of businesses, the SBA offers a number of different loan programs tailored to specific capital needs of growing businesses.

If planning to start a business or expand an existing business, you might need financing help. SBA participates in a number of loan programs designed for business owners who may have trouble qualifying for a traditional bank loan.

SBA loans are the federal agency’s most popular type of financing, but they’re not the only loans available.

 

There’s one big downside: It can be difficult to get an SBA loan. The requirements are stringent, and applicants must also meet the underwriting criteria of the bank providing the SBA loan. On top of that, the application is rigorous, funding can take months, and certain types of small businesses aren’t eligible. For these reasons, some entrepreneurs have grown disillusioned with SBA loans.

However, low annual percentage rates still make the SBA program one of the smartest ways to fund your company.

To start the process, you should visit a local bank or lending institution that participates in SBA programs. SBA loan applications are structured to meet SBA requirements, so that the loan is eligible for an SBA guarantee. This guarantee represents the portion of the loan that SBA will repay to the lender if you default on your loan payments.

Without a doubt, SBA loans are one of the best ways to finance your small business. They’re backed and guaranteed by the federal government, which allows lenders to offer loans with flexible terms and low rates. Getting one can help you grow your business without taking on possibly crippling debt.

The SBA program works by distributing the loan among three parties. 1. The business with a minimum 10% down payment. 2. A conventional lender (typically a bank) covers 50% 3. A so-called Certified Development Company (CDC) puts up the remaining 40%. Certified Development Companies are established under the 504 code as non-profit corporations to support economic growth in the local areas. There are a few hundred such CDCs nationwide.

For more information about securing real estate and a SBA building loan, for a growing business, please contact Chris Falk directly.