The Small Business Administration (SBA) is a U.S. government agency that provides support to entrepreneurs and small businesses. SBA loans are made through banks, credit unions and other lenders who partner with the SBA. The SBA does not provide grants or direct loans with the exception of Disaster Relief Loans. Instead, the SBA guarantees against default certain portions of loans made by lender partners. One of the most popular uses of SBA loans is commercial mortgages on buildings occupied or to be occupied by small business. These programs are beneficial to small business because most conventional bank programs require larger down payments and/or have repayment terms requiring refinance every five years.
The 7(a) Loan Guarantee Program is designed to help small entrepreneurs start or expand their businesses. The maximum size of these loans is $5 million.
The 504 Fixed Asset Financing Program is administered through a non-profit Certified Development Company (CDC) throughout the country. This program provides funding for the purchase or construction of real estate and/or the purchase of business equipment/machinery. Of the total project costs, a lender must provide 50% of the financing, a CDC provides up to 40% of the financing through a 100% SBA-guaranteed debenture, and the applicant provides approximately 10% of the financing. Thorough due diligence of properties purchased through this program is required. The SBA's maximum size for the CDC portion of 504 loans is $5 million ($5.5 million for manufacturers) and some lenders may offer up to $12 million in total.