If your business is in need of financial assistance, the government, through the Small Business Administration (SBA), offers financing options by partnering with third-party lenders. These lenders include local banks, finance trusts, and Certified Development Corporations (CDCs). Popular small business loan options include a Paycheck Protection Program (P3) loan and a small business loan. If you are considering applying, here is some useful information to get you started.
Small business loans
The SBA offers three loan options for small business owners. These options have different eligibility criteria, requirements, and payment plans.
The microcredit program offers a maximum of $ 50,000 in loans to help you start and grow your small business. With an average of $ 13,000, this program also gives you the chance to start and expand a non-profit organization in the child care industry.
Consult with your district SBA agent for guidance in selecting an appropriate lender. The lender will ask you to fill out personal and financial data forms for review. The SBA requires lenders to accept or reject loan applications. The lender also sets the terms of the loan.
7 (a) loan program
A 7 (a) loan is the most common SBA loan program among small businesses based in the US / US looking to start a business in rural areas. SBA guarantees a maximum of $ 5 million for this program. Requirements include:
- The business must be for-profit
- You should not have any outstanding debt with the US government
- Your business meets the SBA criteria for small business
- 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 the SBA website to track the documents you need to apply successfully. Complete the SBA 1919 form. This form collects your personal information and that of your associates and loan guarantors. Submit it to the SBA approved lender of your choice.
You will also need:
- Business registration certificate and license
- Your loan application history
- The financial statement of your business
- Tax return files
- Overview and history of your business
- Commercial premises for rent / information on your landlord’s lease
504 loan program
This program is specially designed for small business owners looking to grow their business and improve their business operations. SBA works with CDCs to provide up to $ 5 million in fixed rate loans to purchase capital assets that improve your community and create employment opportunities.
You can use this loan to upgrade your business’s utilities. You cannot use the funds to offset business 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 tax for the two years preceding the loan application
- Be a for-profit business
Work with your local SBA office to identify an approved CDC, after which, download and complete the 504 loan application documents from the SBA website. The SBA will review your eligibility for the 504 loan based on business records and business statements. Then file the loan application with the CDC and with an SBA approved lender.
Payment Protection Program (P3) loans help small businesses retain employees. The government designed this program to protect the jobs of those employed by small businesses. This loan is repayable if you follow all the rules outlined to keep your employees on the payroll.
You can apply for this loan twice: the first and the second draw of the PPP loan. Not all businesses are eligible for a second PPP loan.
To apply for the first PPP loan, complete Form 2483 or 2483C on the SBA website. You can also forward the request to your lender, who in turn will send it to the SBA.
The second PPP loan is offered to businesses that have used the first loan as stated in the loan conditions. To apply, complete Form 2483 SD or 2483 SD C. Business owners who calculate PPP loan amounts use their gross income from form in Schedule C.
After filling out the form, send it to the SBA or pass it on to your lender. Wait for the lender and the SBA to review your application. You can track the status of your loan by signing up for an account with Capital Access Financial System (CAFS).
Small business loans help small business owners stay in business despite financial difficulties. So if your business fits the bill, don’t let pride get in your way. These resources are for you.