The Small Business Administration (SBA) is a government organization created in 1953 and tasked with helping small businesses succeed. In addition to advocacy, contracting, and training programs, a big part of the SBA’s function is to ensure that small companies receive funding. One way the organization does this is through SBA loans. These loans make it possible for business owners to start, maintain, and grow their companies. If you intend to apply for one, it’s important to understand SBA requirements and your chances of approval.

Important Things to Understand About SBA Loans

It’s a common misconception that the SBA itself grants loans. What it does instead is guaranteed small business loans to encourage more banks to offer them. Should the business owner default on the loan, the SBA makes up at least some of the difference by paying the lender. This enables banks and other lenders to assume more risk than they might have otherwise.

Because of the SBA backing on these loans, it has the authority to create standards that both lenders and borrowers must abide by. This enables many small business owners to qualify for loans where they might not have with typical bank requirements. The SBA’s goal is to make entrepreneurship available to more people.

Most Common Types of SBA Loans

The most common type of loan backed by the SBA is the 7(a) loan. Business owners can use the funds for the following:

  • Acquiring or establishing a new business 
  • Building renovation or construction 
  • Equipment purchases 
  • Real estate deals 
  • Refinancing debt 
  • Revolving credit 
  • Working capital  

The SBA requires all applicants for the general 7(a) loan to demonstrate sound business practices and a specified purpose before applying for the loan.

504 SBA loans are for the specific purpose of purchasing real estate or equipment. Borrowers can use the funds for:

  • Construction or renovation of new facilities 
  • Improvements to real estate already owned 
  • Purchase of machinery or long-term equipment 
  • Purchase of real estate  

Are you ready to apply for SBA loans or explore other financing options? OneClick Commercial Funding is here to help. Please contact us today.