How to choose the right loans for you

When it comes to loans, small business owners have a lot of options to consider. From selecting a lender to determining the type of loan you need, the path to financing can be a confusing one. Of the many places you may look, the Unite States Small Business Administration (SBA) could be a great resource for information on loans, and specifically, different loan programs that are exclusively available to small businesses.

Of those SBA loan programs, the SBA 504 and the SBA 7(a) programs represent options that, depending on your needs and intended outcome, can present many advantages to you as a borrower. It should be noted that SBA typically does not offer direct loans. Instead, these are guaranteed by the SBA and fulfilled through banks or Certified Development Companies (CDC’s).

 

SBA 7(a) and SBA 504 Loans

While both of these SBA loan types can help small business owners to grow or maintain their business, each differs in the purposes for which it can be used.

To start, let’s look at the SBA 7(a) loan. The SBA 7(a) loan is the SBA’s most popular loan program. If you want to take out a loan so that you can have access to working capital, purchase furniture and fixtures, make leasehold improvements, or acquire an existing business, you should consider applying for a SBA 7(a) loan.

On the other hand, if you need to finance the purchase of land or existing buildings or improvement to lands or existing buildings, purchase ground-up construction commercial real estate, or purchase heavy equipment or machinery to operate your business, you should consider the SBA 504 loan.

Under the umbrella of the 7(a) loan program is the SBAExpress loan. The advantage of the Express loan is turnaround time — completed applications will receive a response within 36 hours, a process which usually takes about one month. Express loans generally follow the same standards and uses as the 7(a) loan program.