7(a), Express, 504 or Microloan? Pick the right program before you pick a lender.
By the AceTheSBA team
Asking a lender for the wrong SBA program wastes time on both sides. The easiest way to choose is to start with one question: what will the money buy?
The four main programs
- SBA 7(a): up to $5 million for almost any sound business purpose: working capital, equipment, real estate, buying a business or refinancing. SBA guarantees 85% of loans up to $150,000 and 75% above that.
- SBA Express: a faster 7(a) for up to $500,000, made only by lenders with Express authority, with a 50% SBA guaranty.
- SBA 504: owner-occupied real estate and long-life equipment, with a fixed rate on the CDC portion and 10% to 20% down. Not for working capital.
- Microloan: up to $50,000 from nonprofit intermediaries, with an average of about $13,000. Often the best first step for start-ups and young businesses.
How to choose
- Buying, building or renovating property you occupy, or long-life equipment? Start with the 504.
- Working capital, inventory, buying a business or a mix of uses? Start with the 7(a).
- Under $50,000, or new with thin credit history? Look at a Microloan intermediary.
When a project could go either way, ask lenders to quote both. Over 20 years, the difference in rate, fees and down payment can be significant.
The lender’s view
Lenders specialize. A bank that does few 504 loans, or an intermediary that only makes microloans, is not the right first call for every request. Matching the program first lets you choose lenders who make that loan every week.
Your move this week
Where do you stand?
The SBA Readiness Report matches your business to its best-fit SBA program, based on what you are financing and how much you need, and shows what each program will require from you. Six minutes, $19.99.
This week’s tool
The questions lenders and CDCs ask, and how to answer each one.
$15.00