Small businesses are often considered the heart of the American economy, and many local economies are driven primarily by small businesses. However, it is often difficult for entrepreneurs to obtain loans, which makes SBA loans so important.
At California Mortgage Advisors Inc., we appreciate the role that small businesses play in the economy and local communities. Since 1993, we have experienced growth and expansion that has taken us from a small business to a regional leader in the lending industry. Our Mortgage Advisors are available to help business owners understand their options when it comes to a SBA loan.
Our Mortgage Advisors are available at (800) 927-6560 to answer your questions or click here to apply online.
The SBA (Small Business Administration) is a government agency designed to help enterprising Americans get small business loans, take advantage of contracting opportunities and grow their small businesses.
However, like most government agencies, the SBA attempts to avoid direct interaction or competition with the private sector. When it comes to business loans, the SBA does not directly provide loans to borrowers. However, they do guarantee a percentage of any loans provided to small businesses under SBA guidelines. This reduces lender risk and incentives lenders to provide more loans to small businesses.
While the SBA loan program provides some protection for lenders, it does not totally mitigate the risk inherent in any loan. Individual lenders still have their guidelines and financial requirements for providing any loan, government guaranteed or not. A CMA Mortgage Advisor can help small business owners understand if one of the many types of SBA loan is best for them based on their personal financial situation.
7(a) Loan Program
A 7(a) loan is considered the most flexible of the business loans guaranteed by the SBA. Capped at a maximum amount of 5 million dollars, a 7(a) loan can be used for anything that serves to grow a small business. It can be used as general working capital, to improve facilities, or to purchase real estate for the business. Anything that the SBA determines to be a financially sound decision can be funded through this type of loan.
However, there are a few things that the funds cannot be used for. Specifically, a 7(a) loan cannot be used to pay delinquent taxes, to reimburse a business owner for equity they have paid into the business, or effect any change that doesn’t directly impact the business in a positive manner. A CMA Mortgage Advisor will work with borrowers and an SBA advisor to determine if a project or expenditure is fundable through the 7(a) loan program.
The main advantage of this type of loan is that the government will guarantee up to 85% of the total value of the loan. This leads to looser borrower requirements. It also does not require collateral from the borrower, which means it is ideal for newer, less established businesses to help them launch or make it through periods of limited growth.
A 504 loan is a loan intended to help small businesses buy new equipment and real estate or to make improvement and modifications on existing equipment and real estate. The maximum amount obtainable through a 504 loan is 5 million dollars.
The main difference between a 504 loan and other types of SBA loans is that this type of loan is designed primarily for more established businesses looking to expand through real estate or equipment improvements. It allows profitable businesses to expand in the long-term without sacrificing short-term liquidity. It is also seen as less of a risk for lenders because the financed project or existing company assets are used as collateral.
Terms and Conditions
SBA loans are complicated and require a high level of paperwork from both the borrower and the lending institution to meet federal eligibility guidelines. A CMA Mortgage Advisor will work with individual borrowers to determine which loan plan and terms are best for them based on their specific industry, current assets, desired application of loan funds, and desired repayment rates.
At California Mortgage Advisors Inc., we genuinely believe that we offer our customers the best mortgages in the industry. We have offered a variety of loans since 1993, which means our Mortgage Advisors have successfully matched tens of thousands of borrowers with loans tailored to meet their needs and unique financial situations. Our Mortgage Advisors are available at (800) 927-6560 to answer your questions or click here to apply online.