SBA 504 and 7(a) Loan Options

As a small business owner, you have access to a variety of small business loans. Two of the most popular small business loans available are the SBA 504 and SBA 7(a). Both of these loans are guaranteed by the Small Business Administration, but each is designed with a different purpose in mind. The SBA 504 loan is a loan meant for economic development and the promotion of job creation. For this reason, the loan is limited to fixed-asset and real estate purchases. The SBA 7(a) loan is more of a general-purpose loan used for working capital for nearly any business expense you might incur. Alpine Funding Corp can help you understand and choose the appropriate SBA loan for your unique business needs.

SBA 504 for Real Estate and Equipment

If you are a small business owner looking to expand or update your facilities, the SBA 504 loan is the loan you will want. While an SBA 7(a) loan can also be used for real estate and machinery purchases, the 504 loan is more beneficial to the borrower. 504 loans offer lower interest rates than 7a loans, have lower down payment requirements, and much higher maximum loan amounts. With a 504 loan you are required to put down 10% of the total loan amount, but there is no limit on how much can be borrowed in total. Up to 40% of the loan is provided by a CDC (generally up to $5 million), and the remaining 50% or more will come from the bank. The CDC portion of the loan is also fixed-rate, which is attractive when rates are low. If you are financing real estate, loan terms can reach a maximum of 20 years, while equipment can be financed for up to 10 years.

SBA 7(a) General Purpose Loans

For all of your remaining business financing needs, the SBA 7(a) loan is a great option. 7(a) loans can be used for nearly any business purpose including working capital, purchasing machinery and equipment, furniture, leasehold improvements, starting a business or purchasing an existing business, or in special cases, debt refinancing. Interest rates are slightly higher on 7(a) loans and there is a cap on how much you can borrow. Small businesses can borrow up to $5 million and will be required to make at least a 10% down payment if choosing the 7(a) option. Most purchases will have a maximum repayment term of 10 years, however if you choose to use a 7(a) loan for real estate, 25 years is the maximum.

Qualifying for the SBA 504 or 7(a) Loans

In order to qualify for either loan, your business must be considered a “small” business and meet size requirements outlined by the SBA. This is determined by the net worth and average income of the business. You will also need to meet other requirements such as proving good business and personal credit, sufficient cash flow, and a strong business plan.

If you are interested in SBA 504 or 7(a) loans for your small business, contact Alpine Funding Corp in Tenafly, NJ today for more information. We can discuss your business needs and goals and help you choose the loan that is right for you.

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