MONEY
MATTERS
Small business loans are available
through the U.S. Small Business Administration (SBA) and
most major banks. You will need a thorough business plan
and some assets (a house) to qualify for these. If you
don’t own a home, it will be much more difficult to
obtain a loan. In this case, you might consider
enlisting a partner in your venture or asking someone to
co-sign.
Loans can sometimes be easier to obtain if you are
buying an existing or established business, since the
bank will view the investment as less of a risk. You
will need to have a clean credit report when you apply
for a loan. Be sure to order copies of your credit
reports early so you can clear up any mistakes on your
file. Mistakes are far too common on credit reports so
it would be wise to check yours yearly, regardless of
your situation.
The three
main credit reporting agencies are:
¨
Equifax:
www.equifax.com/
¨
Experian:
www.experian.com/
¨
TransUnion:
www.transunion.com/
Business Loans and Capital:
The Basic 7(a) Loan Guaranty program
is for businesses that are unable to obtain loans
through standard loan programs (banks). The funds
available in this program can be used for general
business purposes including working capital, fixtures,
leasehold improvements, and debt refinancing. The loan
maturity is up to 10 years for working capital and up to
25 years for fixed assets. These loans are still
delivered through commercial lending institutions, while
the SBA and financial institution share the risk
involved if the borrower cannot repay. There are a
number of eligibility requirements, though they are
broad in an effort to make this program available to as
many businesses as possible. Find out more about the
7(a) program by visiting:
www.sba.gov/financing/sbaloan/7a.html.
The Certified Development Company
(CDC) 504 loan program is for small
businesses requiring “brick and mortar financing.” It
is used for fixed asset financing, such as the purchase
of real estate, buildings, and machinery or improvements
such as landscaping, parking lots, and construction.
Generally the assets being financed can be used as
collateral. The maximum loan size is $4 million and loan
maturity terms of ten and twenty years are available.
The money from a 504 loan cannot be used
for debt repayment, purchasing inventory, or working
capital. For more information on the 504 program, visit:
www.sba.gov/financing/sbaloan/cdc504.htm. To locate
a CDC location in your area, visit:
www.sba.gov/gopher/Local-Information/Certified-Development-Companies/.
The Microloan 7(m) loan program
provides short-term loans of up to $35,000 to small
businesses and not-for-profit childcare centers for
working capital or the purchase of fixtures and
supplies. The average loan size under this program is
around $10,500. Proceeds cannot be used to pay off
debts or purchase real estate. The loans are funded by
SBA-designated intermediaries who usually require some
kind of collateral. These loans are not guaranteed by
the SBA. For more information about the 7(m) program,
visit:
www.sba.gov/financing/sbaloan/microloans.html.
