What Is an SBA Loan and How Can It Help Your Small Business?

For many small business owners, growth requires capital. Maybe you're ready to purchase a building, replace equipment, acquire 
another business or simply need additional working capital. An SBA loan may provide another path to financing.
But what exactly is an SBA loan and how does it work?

What Is an SBA Loan?

An SBA loan isn't typically money loaned directly to a business by the U.S. Small Business Administration. Instead, participating 
lenders make the loan, while the SBA guarantees a portion of it.
That guarantee can help lenders provide financing to eligible small businesses that may not otherwise qualify for conventional financing on reasonable terms. Business owners still apply, qualify and repay the loan according to its terms.

What Can an SBA Loan Be Used For?

The answer depends on the SBA program, but eligible uses can include:

•    Starting or acquiring a business
•    Purchasing or improving commercial real estate
•    Buying machinery and equipment
•    Working capital
•    Purchasing inventory, furniture, fixtures or supplies
•    Refinancing certain existing business debt
•    Funding expansion or renovation
•    Complete or partial changes in business ownership

What Are the Most Common Types of SBA Loans?

The SBA's 7(a) program is its primary business loan program and one of the most versatile. Loans can be used for working capital, 
equipment, real estate, business acquisitions and several other eligible business purposes. Most 7(a) loans have a maximum loan 
amount of $5 million.
The SBA 504 program is designed primarily for major fixed assets. It provides long-term, fixed-rate financing for eligible purchases 
such as commercial real estate, construction and long-term machinery and equipment. Unlike 7(a), 504 financing generally cannot 
be used for working capital or inventory.
SBA Microloans provide smaller loans of up to $50,000 through approved intermediary lenders and can help eligible businesses with 
needs such as working capital, inventory, supplies and equipment.

Is an SBA Loan Right for My Business?

There's no single financing solution for every business.
The best place to start is with a conversation. A knowledgeable business banker can help you evaluate what you're trying to 
accomplish, discuss available financing options and determine whether an SBA loan may fit your plans.
At Bank Michigan, we believe better business decisions start with better conversations.
When you're ready to take your next step, start by talking with your local banker.