Small Business Loan: Types of Loans

In the state of California, we are known to be one of the most difficult states to flourish in businesses; most particularly small businesses. California may be one of the most recognized states of struggling small businesses but it’s also famously known for employing more citizens in the past few years. Small businesses generally fail after a few years, if not carefully planned and financed optimally. Join the rate of successful businesses in California by taking out the appropriate loan for you.

You may wonder which loans can help best serve your business without finding yourself stuck in an abundance of debt. Look no further, throughout this article we will go over SBA, or most famously known as small business administration loans, and detail how these loans can help your business.

What Is SBA? 

Before we list the types of SBA and benefits to the loan, it's crucial to understand what small business administration loan means and what it can do for you. As the name suggests, SBA is meant for small business loans carried out by the SBA and banks acting as the lender by distributing an amount to small businesses.

The lenders or banks guarantee flexible terms and interest rates so you may continue to grow your business without being perplexed with overriding debt. There are several types of loans a business can qualify with different pros and cons for each one.

Types of Loans 

Curious which loans you qualify and the benefits to them? SBA offers various loan programs for businesses to flourish in but we will cover the 3 most common loans a business can apply.

  1. 7a Loan Program: Most commonly used, the 7(a) loan guarantees a term loan of up to $5 million. This loan can be used for either working capital, to refinance debt, buy a business, real estate, or equipment financing. Since they do offer a high working capital to businesses, there are more restrictions corresponding with the loan. Luckily, they do offer a long repayment with low interest rates to make your financial responsibilities affordable.
  2. 504 Loan Program: This type of loan is generally meant for those who wish to purchase or improve fixed assets. Fixed assets may include purchasing land, machinery, facilities, etc. Instead of one lender funding these projects, this type of loan requires two lenders, either one from a bank or traditional lender. The loan itself does not cover the entire fund but, instead, covers a majority while the borrower must include collateral damage for the rest.
  3. Microloan Program: While the other two loans are backed by traditional lenders or banks, microloan is supported by non-profit organizations who lend their finances to other small businesses. These funds cover working capital, inventory, equipment, business start-up, etc. Their maximum principle is about $35,000 with a term of 6 years while interest rates range from 8%-13%.

Want More Information? 

Businesses are requiring more funds as regulations and daily operations eat a large part of their financial stake. Let us assist you in this important financial time and help you relish in success. Contact us now for more information on small business administration loans and see which best suits your needs.

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