Small Business Association Loans provide excellent rates and terms for qualified customers and are one of the most popular sources of business financing. JDM Capital Solutions will find you with the perfect lender or partner for your project while you avoid the headaches and delays that are normally accompanied by SBA Lending.
SBA 7(a) overview
SBA 7(a) loans are small business loans of up to $5 million that are provided through the Small Business Administration SBA 7(a) loan program. The SBA 7(a) loan program is the most popular of all the SBA loan programs because the capital it lends can be put toward a wide range of business purposes, like working capital or commercial real estate. Because of the partial guarantee that the SBA provides through the program, SBA 7(a) loans come with ideal terms: SBA 7(a) loan term lengths can go up to 25 years, and SBA 7(a) interest rates can be as low as the market Prime Rate plus 2.25% (Fundera, 2019).
SBA Loans can be used for the following:
- • Commercial Real Estate Acquisitions
- • Commercial Real Estate Refinance
- • Commercial Renovations
- • New Construction
- • Owner-Occupied Commercial Real Estate
- • Existing Business Acquisitions
- • Equipment Financing
- • Franchise Acquisitions
- • Working Capital
- • Start-ups
504 Loan Programs
SBA 504 loans, guaranteed by the U.S. Small Business Administration, provide long-term financing for the purchase of real estate, equipment, and other fixed assets. The loan, which is divided between a bank and an SBA-approved certified development company, generally features 10- to 25-year terms, low-interest rates, and 10% to 15% down payment (Fundera, 2019).
An SBA 504 loan can be broken down into three parts:
- • Bank loan (50%): A bank or direct lender extends half of the total loan amount.
- • CDC loan (40%): An SBA-approved certified development company (CDC) extends 40% of the total loan amount.
- • Down payment (10%): This loan requires a 10% down payment from the borrower. Startups generally have to put 15% down.
The bank and CDC work closely together in issuing your loan, but it’s important to remember that the SBA oversees and regulates only the CDC component of the loan. Most of the terms that we’re mentioning in this article apply only to the CDC portion of the loan. Banks are free to set their own eligibility requirements and terms for the bank portion of the loan (Fundera, 2019).
These loans typically require a 10-15% down payment and must be partially owner-occupied. Customers who qualify will generally show strong personal credit profiles and or business financials.
SBA 7(a) and (504) Pros:
- • Loans up to 5 million with competitive bank interest rates and terms
- • Extended payment terms
- • Minimal down payments
- • Can be used across a wide range of industries and purposes
- • Doesn’t always require collateral
- • Money can be used for more than one purpose within the scope of the loan
- • 100% financing available for equipment and debt refinance
SBA 7(a) and (504) Cons:
- • Long approval and loan processing times (up to 120 days)
- • Large amounts of paperwork
- • Stricter guidelines for approvals versus other business funding options
- • Often requires a strong credit profile on behalf of the borrower
- • Industry restrictions
JDM Capital Solutions promises to beat your current SBA Loan rate/terms for customers receiving these services elsewhere. Email your current SBA Loan contract/term sheet to info@jdmcapsolutions.com and JDM Capital Solutions will explore solutions to save your business money every month.
For new inquiries regarding SBA Loan Programs, call us today at (702) 825-7972 or email info@jdmcapsolutions.com to schedule a phone consultation.
References:
"How to Get an SBA 7(a) Loan: The Ultimate Guide." Fundera, www.fundera.com/business-loans/guides/sba-7a-loan.
