SBA Loans – What You Need to Know

1. SBA Loans – What You Need to Know Small business owners can consider the SBA loan program when it comes to expanding their business, boosting working capital, or acquiring inventory, equipment and more. The SBA (Small Business Administration) is not a lender, but they provide a guarantee to the bank offering the loan. This backing by the US government increases your chances of approval while providing flexibility and good interest rates. It is important to understand the number of SBA loan programs available as each one is designed for different purposes. The most popular and flexible of the loan options is the 7(a) loan program. The CDC-504 loan is also popular and is used for fixed assets, such as purchasing real estate or equipment. The SBA Microloan is used for small loans under $50,000 for new or growing businesses. Lastly, there is the Disaster Loan Program, specifically designed to help businesses recover from losses that resulted from natural disasters. It's important to note that even though the SBA is not a lender, it has already guaranteed millions of small business loans since 1953, when it was first established. These loans are offered by participating credit unions and banks, along with a number of licensed non-bank lenders. The program is designed to encourage banks and other lenders to consider working with small business owners. This helps small business owners secure the financing that they need, encouraging small business growth throughout the United States. Banks generally consider small business loans a high risk. In order to reduce the risk, the SBA guarantees up to eighty-five percent of eligible loans with their 7(a) loan program. They share the risk with the lender, ensuring that the lender has the guarantor that they need to approve the loan, thereby eliminating excess risk and helping small businesses continue to push forward. The loan application remains the same with the lender ultimately deciding whether to approve the application or not. On approval, the application is then made to the SBA. The 7(a) loan program is the most popular SBA loan that covers a wide range of financial needs. This loan can be used for working capital, purchasing equipment, buying land and buildings, renovating an existing building, and start-up costs for new businesses. This loan cannot be used for purchasing a property to rent out or to reimburse the business owner for their initial investment. The CDC-504 loan program was created to finance large fixed assets such as real estate or equipment. With this program, you must create one job for each $65,000 you borrow to help develop your local community. The maximum loan is $5.5 million and this is for manufacturing, energy reduction and alternative fuels. For small manufacturers, the maximum loan is $4 million and in order to quality you must create or retain one job per $100,000 borrowed. The assets that you are using the financing for are used as collateral and you can include fees up to three percent in the loan amount. The SBA Microloan Program was designed for newly established and growing businesses. These loans are often available through non-profit community lenders with a maximum loan of

2. $50,000. The approval decisions for these loans are made at a local level. Microloans can be used for a wide variety of purposes including inventory purchases, working capital, furniture, machinery and equipment and more. You cannot use the microloan program to repay existing debts or to purchase real estate. About Us: CalPrivate Bank, formerly San Diego Private Bank, is a leading private bank serving clients throughout Southern California in the United States. This very well-established bank services high net worth individuals and businesses of all sizes. CalPrivate Bank's focus is to provide a Distinctly Different Banking Experience through unparalleled service and creative funding solutions for individuals and businesses with complex financial needs. They offer a wide array of financial services, including checking, savings, time deposit accounts, treasury management and related tools. To find out more, visit https://calprivate.bank/.