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SBA Drives Loan Programs for Small Businesses

July 1, 2011 3 Min Read Small Business Advisory
Steven E. Staugaitis, CPA, CVA Director, Audit & Accounting, Small Business Advisory Services Group Leader, Family-Owned Businesses Group Co-Leader

The U.S. economy relies on small businesses to keep it moving. The U.S. Small Business Administration (SBA) opens up financial opportunities for these companies to develop, sustain, and grow through a variety of programs. While the SBA does not loan money directly to businesses, it provides programs that offer guarantees to lenders or to surety companies. Size standards to be eligible for SBA guarantees have recently increased to include businesses that have a tangible net worth of less than $15 million and average net income after taxes for two years of less than $5 million. As you seek financing, here are a few programs to consider:

7(a) Loan Program

The 7(a) loans are available for the establishment of a new business or to assist with an acquisition, expansion, or operation of an existing business. The proceeds of these loans can be used to acquire or expand into a new facility, acquire new equipment or an existing business, or provide working capital. In certain cases, the SBA will even allow for the refinancing of existing debt that does not already have favorable terms.  Currently, the limits for certain 7(a) loans are as high as $5 million.

CDC/504 Loan Program

The 504 program encourages economic development within a community by offering long-term, fixed-rate financing for the expansion or modernization of facilities. The proceeds of these loans can be used to purchase land and buildings, make improvements to land and buildings, modernize existing facilities, or acquire long-term machinery and equipment. The proceeds may not be used for working capital or to purchase inventory. Refinancing of certain eligible debt is currently being permitted. Loans are available up to $5 million and are set at a fixed rate for up to 20 years.

Microloan Program

The Microloan Program targets small businesses and certain not-for-profit organizations looking to purchase equipment or that need working capital. Since these loans are targeted to very small businesses, the loans can be no greater than $50,000.

Surety Bond Program

In addition to loans, the SBA also offers guarantees to surety companies for businesses that would otherwise be unable to obtain a bond without a guarantee. Typically, the contract cannot exceed $5 million and your business must be classified as small, which for some contractors may be considered as high as $33.5 million in annual revenue.

Other Assistance

In addition to guarantee programs, the SBA also provides a plethora of resources for starting and managing a business, from writing a business plan to running the day-to-day activities of a business and even help with finding venture capital. Whether you are looking to expand your operations or obtain working capital, the SBA is a resource worth looking into.

Steven E. Staugaitis can be reached at Email or 215.441.4600.

Contact the Author

Steven E. Staugaitis, CPA, CVA

Steven E. Staugaitis, CPA, CVA

Director, Audit & Accounting, Small Business Advisory Services Group Leader, Family-Owned Businesses Group Co-Leader

Family-Owned Businesses Specialist, Small Business Advisory Specialist, Business Valuation Specialist, Transition/Exit Planning Specialist

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