Loans that are backed by the Small Business Administration are favorable for business owners. Your small business can get financing that covers things such as real estate purchases, remodeling, construction, equipment, technology and working capital. This type of comprehensive loan is useful because it has low interest rates and long terms for repayment.
Of course, before you start counting your chickens, first you need apply. That means knowing which SBA loan is the right fit for your business’s current goals. What are the differences, pros and cons?
What Type of SBA Loan Options Are Available?
There are several different options for small business loans. The purpose of each one is a little different and so are the terms of the loan.
SBA 7(a) Loans
First are SBA 7(a) loans. These are flexible loans that can cover quite a few different business needs. If you’re looking for a jack-of-all-trades loan that can cover business expansion on many levels, a 7(a) SBA loan is going to be a great choice. This type of loan adapts well to remodeling, equipment upgrades, purchases of new payment systems and things like that.
SBA 504 Loans
Next are the SBA 504 loans. These loans are also geared towards growing your business, but they have terms that are better for longer loans to buy fixed assets that are designed to last a long time. Many business owners use 504 loans any time they want to purchase real estate, build a commercial property, buy heavy machinery, buy construction equipment and handle similar needs.
SBA Express Loans
Some lenders also offer SBA Express loans. These are similar to 504 loans but with a smaller funding amount in exchange for faster approval and processing. When your business needs money more quickly but still wants good terms, Express loans are a great option. They can cover real estate and equipment purchases, but only up to $500,000.
Another tool for expanding your company, investing in new products or overall contributing to your business’s financial health are SBA microloans. These are small-capital-amount loans that give you an infusion of financing to make smart business decisions.
For example, you can use the loan to purchase a large volume of inventory from your suppliers at a significant discount. These SBA loans only provide a max of $50,000, but that’s more than enough to get inventory, supplies, working capital for business operations and even many types of equipment.