Types of Loans for Small Businesses

Types of Loans for Small Businesses


Types of Loans for Small Businesses

Most startups have to consider approaching investors to fund part of their business. It’s why they approach family and friends, VCs and angel investors. But not everyone is able to raise capital for their venture in this manner. Many prospective business owners consider approaching banks and other financial institutions for loans.

Here is a list of the different types of loans that are available 

SBA loans
At the moment, the SBA offers 4 different small business loans

  • 7(a) Loan Program- This particular lending program is the most common and basic type of loan. These loans can be used for different purposes such as for working capital, buying equipment, fixtures, furniture and machines; it is applicable for buying buildings as well as for the construction of new buildings or renovations of existing structures to set up any new business or even help in the operation, expansion or acquisition of any existing business.

The maximum amount you can borrow under this program is $5million and you can also apply through participating lenders. The maturity period of the loan is up to 10 years in the case of working capital & up to 25 years in the case of fixed assets

  • Microloan program: The SBA also offers very small loans to growing or small businesses. You can use these loans as working capital or even to buy supplies, inventory, equipment, machinery or furniture. However, you can’t use it to make real estate purchases or to pay off a debt.
  • The CDC/504 Loan Program-This program provides a business with certain long-term fixed-rate financing for any major assets, including real estate and equipment. Typically, these loans are structured in such a way that the SBA provides 40% of the overall project costs, the participating lender covers up to 50% while you as the borrower have to put up 10%. The funds that come from this loan can’t be used to purchase inventory or as working capital. The maximum amount that you can borrow from this program is $5.5 million and these loans have maturity terms of 10/20 years.
  • Disaster loans- The SBA also provides disaster loans with a low interest rate, to businesses of different sizes. These loans can be used to replace/repair real estate, machinery & equipment, business assets and inventory that were damaged/destroyed in any declared disaster. Qualified businesses can get up to

$2 million as a disaster loan from the SBA.
These are some of the loans available to you and the one you apply for would be dependent on the nature of your requirement, the loan amount you are looking for and the repayment time frame that will be suitable for you.
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Business & Marketing Tips: Types of Loans for Small Businesses
Types of Loans for Small Businesses
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