- The purchase of real estate to house the business
- Construction, renovation or leasehold improvements
- To purchase furniture, fixtures, machinery, or equipment
- For the flooring of inventory and for working capital
Micro Loans
Micro loans are small loans ($35,000 and under) for start-up and/or newly established small businesses. The SBA provides funds to non-profit community lenders which then make the loans to business borrowers with the credit decision made locally. The maximum term micro loan is 6 years with each lender having their own lending and credit requirements. However all microloans require some type of collateral and the personal guarantee of the business owner. Micro loans normally require that small business owners applying for financing must fulfill training and business planning requirements before a loan application is accepted. A Micro Loan can have many different uses including :
working capital
inventory
supplies
furniture
fixtures
machinery
equipment
Micro loans are relatively easy to obtain compared to traditional bank loans. There may be a problem if you are not located near one the the non-profit community lenders since they tend to only distribute funds in their own communities.
SBA loans
SBA loans are government supported financing for your business
SBA loans are an excellent source of funding for your business. The Small Business Administration offers a variety of loan guarantee programs. These programs help a business that may not qualify for a loan get approved on reasonable terms. The SBA does not actually give you the money, the commercial banks will loan you the money.
With SBA loans there is no limit to the amount of capital you can request. There is pretty good flexibility on how long you can take to pay the loan back. Most SBA loans allow for a maximum of 25 years maturity.
There are several criteria that must be met before you can completely qualify for SBA loans:
You must have some sort of stake in the business. They want to see that you are willing to give some of your own money into the business. You will work harder if your money is at stake.
You must have a strong business plan. This business plan should be extremely detailed and tell exactly how you plan to make money and how you plan to spend the money you are requesting.
You need good personal credit scores. If personally you pay all of your bills on time, than chances are you will be diligent about paying back the business loan, and that is what the SBA wants to see. There is a lot of importance placed on this. It would be wise to check your personal credit scores before you apply so you know where you stand when you go into speak with the lender.
Search our business funding directory to find the financing your business needs.
Franchise financing
Franchise financing can be a frustrating process without knowing your options. Apart from your local bank, these options fall under 3 main categories:
1. SBA FinancingThe U.S. Small Business Administration (SBA) guarantees loans for private banks/lenders. Programs include the popular 7(a) loan for up to $100,000.
2. Non-SBA and Specialty Franchise FinancingThere are commercial lenders that specialize in franchise financing through equipment leases and structured term loans. There is also the ERSOP program, using your 401k or IRA as start-up capital without penalties, taxes or distributions.
3. The FranchisorMany franchise companies either offer financial assistance themselves or help franchisees finds a bank or other lender. Most have a list of "preferred lenders".
Personal AssetsWhether it's SBA or non-SBA franchise financing, anywhere from 15% to 30% of the total capital need can be required of the borrower. Franchise start-up costs vary wildly across franchises, so this could be anywhere from $20,000 to $200,000. A borrower may need to refinance their personal property or liquidate stocks, bonds, IRAs, 401k, etc.
If possible it would be best if an individual could obtain the credit they need using business credit instead of personal credit, so that personal assets are not at a full risk. Also banks are more apt to loan more money to a business than to an individual. Building good business credit works just the same as building personal credit. Our Business Credit Building System shows you step-by-step how to setup business credit the right way and get the financing that is needed.
Browse our free business capital search engine to connect with lenders that can help you obtain franchise financing.
Development financing
Development financing with the SBA 504 loan program.This program provides you with long-term, fixed-rate financing for major fixed assets (land, buildings, etc.). This program is set up to contribute to the economic development of a community. The SBA through Certified Development Companies (CDC) works with private-sector lenders to provide financing to small businesses.These programs include a loan from a private-sector lender that covers 50% percent of the project and a secondary loan for up to 40% of the project cost from the CDC that is 100% SBA-guaranteed. This will leave you with a combined loan-to-value ratio of 90%.Funding from this program can be used for:
Purchasing land and improvements including existing buildings
Grading and street improvements
Utilities, parking lots and landscaping
Construction of new facilities
Modernizing, renovating or converting existing facilities
Purchasing long-term machinery and equipment
** The loan program cannot be used for working capital or inventory, consolidating or repaying debt, or refinancing.
Import export loans
export loans provides capital to exportersThe SBA supports export financing to small businesses when financing is not otherwise available on reasonable terms. The program encourages lenders to offer export working capital loans by guaranteeing repayment of up to $1 million or 90 percent of a loan amount, whichever is less.The loans have:
Guarantees of up to $1.1 million or
Guarantees up to $1.25 million if it's combined with an international trade loan
A reasonable turnaround. The SBA can usually turnaround this type of loan within 10 days or less
An applicant must be in business for a full year at the time of application. The SBA may waive this if the applicant has export trade experience.Applicant businesses must:
Operate for profit
Be engaged in business in the United States
Have reasonable owner equity to invest and
Use alternative financial resources first, including personal assets
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