If your business needs financial assistance, the government, through the Small Business Administration (SBA), provides financing options by partnering with third-party lenders. These lenders include local banks, finance trusts and Certified Development Companies (CDCs). Popular small business loan options include a Paycheck Protection Program (PPP) loan and small business loan. If you're considering applying, here is some useful information to get you started.

Small business loans

The SBA provides three loan options for small business owners. These options have different eligibility criteria, requirements and payment plans.

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Microloan program

The microloan program offers a maximum of $50,000 in loans to help you start and build your small enterprise. With an average of $13,000, this program also gives you a chance to start and expand a non-profit organization in the child care sector.

Consult your SBA District officer to guide you on selecting a suitable lender. The lender will ask you to fill personal and financial data forms for review. The SBA mandates the lenders to accept or reject loan applications. The lender also sets the loan terms.

7(a) loan program

A 7(a) loan is the most common SBA loan program among the U.S./U.S. territory-based small businesses looking to start a business in rural regions. SBA guarantees a maximum of $5 million for this program. Requirements include:

  • The enterprise should be for-profit
  • You should not have any outstanding debt obligations with the US government
  • Your company falls under the SBA's criteria for small businesses
  • You should have invested your time and money in the business as the owner

To apply for this loan, download the loan checklist form from SBA's website to track what documents you need to apply successfully. Fill out the SBA form 1919. This form collects your personal information and that of your business associates and loan guarantors. Submit it to the SBA-approved lender of your choice.

You'll also need:

  • Business registration certificate and licensing
  • Your loan application history
  • Your business's financial statement
  • Income tax return records
  • Your company's overview and history
  • Business premises rent/lease information from your landlord

504 loan program

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This program is specially made for small business owners seeking to expand their business and enhance business operations. SBA collaborates with CDCs to provide a maximum of $5 million fixed-rate loans to purchase fixed assets that improve your community and create job opportunities.

You can use this loan to modernize your company utilities. You cannot use the funds to offset company debts, buy inventory, or as working capital.

The CDC/504 loan requires your business to meet the following conditions:

  • Have a net worth of $15 million
  • Have a net income not exceeding $5 million after taxation for the two years before the loan application
  • Be a profit-oriented enterprise

Collaborate with your local SBA office to identify an approved CDC, after which, download and fill the 504 loan application documents on SBA's website. SBA will review your 504 loan eligibility based on business records and business statements. Next, file the loan application with the CDC and with an SBA-approved lender.

PPP loans

Payment Protection Program (PPP) loans help small businesses retain their employees. The government designed this program to protect the jobs of those employed by small enterprises. This loan is forgivable if you meet all the outlined rules on keeping your employees on the payroll.

First draw

You can apply for this loan twice: the first and second draw PPP loan. Not all businesses are eligible for a second PPP loan.

To apply for the first draw PPP loan, fill out Form 2483 or 2483C from SBA's website. You may also forward the application to your lender, who will, in turn, send the application to SBA.

Second draw

The second draw PPP loan is offered to businesses who used the first loan as outlined in the loan terms. To apply, fill out Form 2483 SD or 2483 SD C. Business owners calculating PPP loan amounts use their gross income from the Schedule C form.

After filing the form, send it to SBA or forward it to your lender. Wait for the lender and SBA to review your application. You can track your loan status by signing up for an account with Capital Access Financial System (CAFS).

Conclusion

Small business loans help small company owners remain in business amid financial challenges. So if your business fits the bill, don't let pride get in the way. These resources are meant for you to use.