Qualifying for an SBA loan based on type
There are several types of SBA loans, each one serving a different purpose and featuring varying requirements. The most common types of SBA loans include 7(a), 504, microloans, and disaster loans.
SBA 504 loans
SBA 504 loans allow businesses to purchase fixed assets, which are typically real estate, land, machinery, and long-term equipment. These loans can also be used to repair or modernize existing property, land, streets, utilities, parking lots, and even landscaping.
You can’t use an SBA 504 loan for working capital, inventory purchases, to invest in rental properties, consolidate debt, or engage in any other type of refinancing.
Microloans are intended for small businesses and certain not-for-profit childcare centers hoping to expand or startup. These loans typically provide between $13,000 to $50,000 in funds.
Microloans are fairly flexible and can be used for purchasing inventory, supplies, machinery, equipment, furniture, and more. They can also serve as working capital. However, funds from an SBA microloan cannot be used to refinance debt or purchase real estate.
Disaster loans are only available to small businesses and certain nonprofit organizations affected by a declared disaster. These are low-interest, long-term loans intended for alleviating the impacts of physical and economic damage caused by a declared disaster.
SBA 7(a) loans
SBA 7(a) loans are by far the most flexible and popular financing solution. These loans maintain a maximum funding amount of $5 million which can be put towards a wide range of business expenses.
You can use funds from an SBA 7(a) loan to purchase inventory, equipment, real estate, refinance debt, and acquire other businesses. SBA 7(a) loans are available through qualifying lenders such as banks, credit unions, and even fintech marketplaces like National.
There are several types of SBA 7(a) loans:
● Standard 7(a)
● 7(a) Small Loan
● SBA Express
● Export Express
● Export Working Capital
● International Trade
● Preferred Lenders
● Veterans Advantage
Each SBA 7(a) loan type has slight variations when it comes to structure, terms,
and qualifications. In some cases, it may be possible to negotiate interest rates and other
terms with your lender.
Some SBA 7(a) loan types are also intended for distinct purposes. For example,
International Trade loans are for businesses directly affected by foreign trade while
veteran-owned businesses can access reduced rates through Veteran Advantage.