There are a variety of loan programs available through the SBA including specific ones for veterans, disaster recovery, etc. The primary one for small business owners is the 7(a) program, which is more generally focused on helping small businesses start and grow. 

How it works: The SBA does not directly lend money to business owners. Instead, small business owners secure an SBA loan through an authorized SBA lender (such as a bank), and the SBA guarantees a portion of the loan; thereby mitigating some of the risk and incentivizing financial institutions to lend money to small businesses.

ADVANTAGES:

  • Typically offer more attractive payment terms and interest rates than other types of loans
  • Lower down payments
  • Funding available from $5,000 to $5 million
  • Loan terms of 5-25 years available (generally longer than conventional loans)
  • No prepayment penalty

DISADVANTAGES:

  • Complex and lengthy process
  • Collateral of 10-30% typically required (Note: ROBS/401(k) Rollover funding can be used to satisfy this requirement)
  • Strict acceptance criteria based on 5 ‘C’s’: character, cash flow, credit, collateral and conditions
  • Stringent use terms

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