SBA Business Loan Programs
7(A) Program
The 7(a) Loan Guarantee Program represents about 80% of the financial assistance supported by the Small Business Administration (SBA). The program guarantees loans offered to small business by private sector lenders with a contribution of at least 10% equity form the small business owner being helped. This helps small companies that might otherwise have trouble getting funding from a bank or other lender by ensuring that the lender won’t lose the full amount of the loan if the business fails. The SBA also offers a limited number of loans directly to the small businesses. This means that if a business defaults, the SBA will pay a previously agreed upon percentage of the loan to the lender. The maximum that the SBA can guarantee is $750,000, which represents a 75% guarantee of a one-million dollar loan. However, the SBA can guarantee 90% of the loan under $155,000. In general, the SBA can guarantee up to 85% of the loan over %155,000, as long as the SBA liability does not exceed the $750,000 cap. The minimum amount that the SBA can guarantee is 70%.
Typically, a 504 project includes a loan secured with a senior lien form a private-sector lender covering up to 50% of the project cost, and a loan secured with a junior lien from the Certified Development Company (CDC) (backed by a SBA-guaranteed debenture) covering up to 40% of the cost, and contribution of at least 10% of the equity from the small business being helped. The maximum SBA debenture is $2,000,000 for meeting the job creation criteria or a community development goal. General, a business must create or retain one job for every $35,000 provided by the SBA.
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