Small business owners will be faced with many challenges throughout the lifetime of their business(s). Luckily, there are many financial options to consider when you are going through these obstacles. When you come to the decision that a small business loan is right for you there are many options to consider. Selecting a lender, determining the type of loan that is right for you, and making sure you have an adequate financial plan for your business after you get approved for the loan.
The United States Business Administration (SBA) can be a great place to look to for resources when deciding what type of loan is right for you. There are different types of SBA loan programs available exclusively to small businesses and its worth checking out to make sure your business qualifies.
Out of those many SBA loan programs the SBA 504 and 7(a) are among the most popular and offer very unique benefits. We will dive into both of them and discuss the differences between the two.
Lets take a look into the SBA 7(a)b loan. This is the SBA’s most popular loan program. This program is meant for business owners looking to have working capital, purchase furniture, fixtures, make leasehold improvements, and/or acquire a business. Another part of the 7(a) loan program is the SBAExpress loan. The Express loan is mainly sought after for its turnaround time. Most often, completed applications will receive a response within 36 hours, which is a lot shorter than the months of waiting.
SBA 504 loans operate a little different. This type of loan is mainly used to purchase land or existing buildings, renovate facilities, purchase equipment, and/or construction for commercial real estate. The SBA 504 loan is an economic development program which is dependent on the amount of financing that you receive.
Any type of SBA loan is only issued through financial institutions and not the SBA directly. These institutions offer SBA loans which are then guarantees by the SBA. This means that is a borrower defaults, the SBA will cover the cost of the loan. Now that you know the main differences between the two types of loans figuring out what type of loan is best for you will be much easier.