GOVERNMENT LOANS

Capital Type Definition

SBA small business loans can be used for purchase of real estate to house the business, construction, renovation or leasehold improvements, to purchase furniture, fixtures, machinery, or equipment, for the flooring of inventory and for working capital.

7A: SBA Loan Guaranty - Loans to small businesses from private-sector lenders (banks, etc.) which are guaranteed by the SBA. The SBA has no funds for direct lending. Apply

Government small business loan - the SBA 7(a) loan program

Government small business loans or SBA loans offer a wide variety of loan guarantee programs to fund small businesses that can't otherwise qualify for loans on reasonable terms. Commercial lenders make the loans and the SBA guarantees them, as the SBA has no funds for direct lending or grants.

Government small business loans have two important points:

1) There is no limit on the amount of capital that can be requested.
2) The maximum SBA 7(a) loan maturity term is 25 years.

To qualify, you should meet these criteria:

You must have a stake in the business. The theory is if you have put your own money into your venture, then you are much more likely to push harder for the success of your business.
You should have a strong business plan showing the detailed plans on how your business can make money. How will you be able to repay the loan and does your business earn enough to cover the monthly payments.
You need a good personal credit rating. The borrower's track record in paying their bills will form an important component in the loan application process.

Certified Development SBA 504: Loans to small businesses with long-term, fixed-rate financing for major fixed assets, such as land and buildings. CDCs work with the SBA and private-sector lenders to provide the financing. Apply

Development financing with the SBA 504 loan program.

This program provides you with long-term, fixed-rate financing for major fixed assets (land, buildings, etc.). This program is set up to contribute to the economic development of a community. The SBA through Certified Development Companies (CDC) works with private-sector lenders to provide financing to small businesses.

These programs include a loan from a private-sector lender that covers 50% percent of the project and a secondary loan for up to 40% of the project cost from the CDC that is 100% SBA-guaranteed. Leaving you with a combined 90% LTV.

Funding from this program can be used for:

Purchasing land and improvements, including existing buildings
Grading, street improvements
Utilities, parking lots and landscaping
Construction of new facilities
Modernizing, renovating or converting existing facilities
Purchasing long-term machinery and equipment

The loan program cannot be used for working capital or inventory, consolidating or repaying debt, or refinancing.

Federal Export Assistance Loans: Export financing of U.S. goods and services through a variety of loan, guarantee, and insurance programs. (Ex-Im Bank Programs) Apply

Municipal equipment leasing - tax-exempt financing

Municipal equipment leasing is for:

State governments and agencies
County governments and agencies
City governments and agencies
Other public entities funded by state and local taxes

Municipal equipment leasing is best used when government agencies need:

To purchase equipment and there isn't room in the current budget.
To make an equipment purchase that is too small to justify a bond issue.
To purchase equipment but its useful life doesn't justify long term financing.
To purchase equipment but, whether for timing or debt limitations, cannot fund the purchase.

If this describes your circumstances, then a deferred payment plan is necessary to acquire the equipment you need.