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COMMON TYPES OF GOVERNMENT LOANS FOR SMALL BUSINESS
FROM THE U.S. SMALL BUSINESS ADMINISTRATION (SBA)

This program helps qualified small businesses obtain financing when they might not be eligible for business loans through normal lending channels.

7(A) Loan Guaranty Program
Financing under this program can be guaranteed for a variety of general business purposes. Loans can be used for most business purposes including working capital, machinery and equipment, furniture and fixtures, land and building (including purchase, renovation and new construction), leasehold improvements, and debt refinancing (under special conditions). Loan maturity is up to 10 years for working capital and generally up to 25 years for fixed assets.

Microloan Program
Under this program, SBA makes funds available to nonprofit community based lenders which, in turn, make loans to eligible borrowers in amounts up to a maximum of $35,000. The average loan size is about $10,500. Applications are submitted to the local lender and all credit decisions are made on the local level. The maximum term allowed for a microloan is six years. Each lender has its own lending and credit requirements. However, business owners contemplating application for a microloan should be aware that lenders will generally require some type of collateral, and the personal guarantee of the business owner.

Prequalification Program
The Prequalification Loan program uses intermediary organizations to assist prospective borrowers in developing viable loan application packages and securing loans. The job of the intermediary is to work with the applicant to make sure the business plan is complete and that the application is both eligible and has credit merit. To find out whether there is a pre-qualification intermediary operating in your area, contact your local SBA office. Note: Small Business Development Centers serving as intermediaries do not charge a fee for loan packaging. For-profit organizations will charge a fee. The maximum loan amount for this pilot program is $250,000. Interest Rates, Maturities, Collateral policy, and Guaranty percentages all follow the standard 7(a) loan program (see above).

CDC 504 Program
This program is a long-term financing tool for economic development within a community. The 504 Program provides growing businesses with long-term, fixed-rate financing for major fixed assets, such as land and buildings. Typically, a 504 project includes a loan secured with a senior lien from a private-sector lender covering up to 50 percent of the project cost, a loan secured with a junior lien from the CDC (backed by a 100 percent SBA-guaranteed debenture) covering up to 40 percent of the cost, and a contribution of at least 10 percent equity from the small business being helped.

CAPlines Program
An umbrella program under which the SBA helps small businesses meet their short-term and cyclical working-capital needs. A CAPLines loan, Except the Small Asset-Based Line, can be for any dollar amount that does not exceed SBA's limit. There are five programs for small businesses: SEASONAL LINE: advances against anticipated inventory and accounts receivable help during peak seasons when businesses experience seasonal sales fluctuations. CONTRACT LINE: Finances the direct labor and material cost associated with performing assignable contract(s). BUILDERS LINE: Finances direct labor-and material costs. STANDARD ASSET-BASED LINE: An asset-based revolving line of credit for businesses unable to meet credit standards associated with long-term credit. SMALL ASSET-BASED LINE: An asset-based revolving line of credit of up to $200,000.

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