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Small Business Loans

There are several different types of small business loans available. These loans can be used for most business purposes such as purchasing furniture, machinery or equipment or purchase of real estate that will house the business.

Micro Loans- these are small business loans for $35,000 and under for start-up and/or new established small businesses. The maximum term for a micro loan is 6 years with each lender having their own lending and credit requirements. All microloans require some type of collateral and the personal guarantee of the business owner. A micro small business loan can be used in a number of ways such as working capital, inventory, supplies, furniture, machinery and equipment.

Small Business Administration (SBA) Loans - the Small Business Administration offers a variety of loan guarantee programs. With a SBA loan there is no limit to the amount of money or capital that you can request. Most SBA loans allow up to 25 years for repayment. Of course, these terms of the small business loan are flexible. There are a couple of criteria that you must meet to qualify for a SBA loan:

You must have some of your own money into the business. The reasoning behind this is that you will work harder at making your business a success if your money is at stake.

You must have a strong business plan. Your business plan will need to be extremely detailed and tell exactly how you plan to make money and how you plan to spend the money you are requesting.

You need good personal credit scores. The SBA wants to see that you are paying all your bills on time because that increases the chances that you will pay back your small business loans. Check your personal credit scores before you apply so you know where you stand before you speak with the lender.

Development financing with the SBA 504 loan program - this program is set up to contribute to the economic development of a community by providing you with long-term, fixed-rate financing for major fixed assets such as land or buildings. The SBA through Certified Development Companies (CDC) will work with private sector lenders to provide financing to small businesses. The private sector lender will cover 50% of this small business loan and a secondary loan for up to 40% of the project cost will come from the CDC. This is a combined loan-to-value ratio of 90%. This small business loan can be used for purchasing land, improving existing buildings, utilities, parking lots, construction of new facilities, and purchasing long term machinery and equipment. You can not use this small business loan for working capital or inventory, consolidating or repaying debt or refinancing.

These are only a few options for small business loans. Contact your local SBA for more information on the types of loans they provide and the criteria to meet to qualify for the different loans.