The Small Business Administration (SBA) offers several loan programs designed to meet the financing needs of a variety of business types. Here we’ll examine the lending requirements for four different SBA Loans: 7(a) loans, 504 loans, Microloans, and Disaster loans.

7(a) Loans

The SBA 7(a) loan is the agency’s most popular loan program. These loans can be used for a wide range of business purposes, including working capital, refinancing debt, or purchasing a business, real estate, or equipment.

To qualify, a business must:

• Operate for profit.
• Be small, as defined by SBA.
• Be engaged in, or propose to do business in, the United States or its territories.
• Have reasonable invested equity.
• Use alternative financial resources, including personal assets, before seeking financial assistance.

504 Loans

SBA 504 loans are designed to help small businesses acquire major fixed assets and promote economic development within communities. They cannot be used for working capital or inventory, consolidating or repaying debt, or refinancing.

The basic eligibility criteria include:

• Operating as a for-profit company in the U.S. or its territories.
• Having a tangible net worth of less than $15 million.
• An average net income of less than $5 million after federal income taxes for the two years preceding your application.

Microloans

SBA microloans are designed for small businesses and certain not-for-profit childcare centers in need of small-scale financing. These loans are ideal for start-ups, or businesses in need of an infusion of working capital.

Microloan eligibility requirements include:

• Being a for-profit business or not-for-profit childcare center.
• Meeting the SBA’s size standards for a small business.
• Demonstrating a need for the desired credit.

Disaster Loans

SBA disaster loans are designed to help businesses recover from declared disasters. If your business is located within a declared disaster area, you may be eligible for financial assistance.

Eligibility criteria for most disaster loans include:

• Being located within a disaster declared county or contiguous county.
• Sustaining physical damage or economic injury as a result.
• Having a credit history acceptable to SBA.
• Demonstrating the ability to repay all loans.

Each of these SBA loans has its unique set of lending requirements. It’s crucial to understand these requirements before applying for an SBA loan to ensure your business meets the specific eligibility conditions. Understanding these requirements ahead of time can save you time and effort during the application process.