If your company has an average net income after state and federal taxes of $5 million and your tangible net worth is less than $15 million, you have many options to consider when it comes to business loans, especially loans from the Federal Agency for Finance. Small Business Development (SBA).
The SBA is a great resource for information on loan programs exclusively for small and medium-sized businesses, also known as SMEs. Two of the most popular programs for SMEs are: SBA 504 and SBA 7(a). Both can help business owners maintain and grow their business. However, each has different purposes. Meet them here!
504 loan
SBA 504 loans are intended to: help business owners purchase buildings, improve existing facilities, purchase machinery and equipment, or purchase commercial property. In addition, they promote job growth in local communities.
These are the requirements to apply for the loan that best suits the needs of your business:
- Operate as a for-profit business in the United States or its territories
- Have a tangible net worth of less than $15 million
- Have an average net income of less than $5 million after federal taxes for the two years prior to your application
- If the purpose is to purchase a commercial property, your business must occupy at least 51% of the commercial building you are financing and meet the local CDC’s job creation and economic growth requirements.
7(a) loan
The 7(a) Loan Program is the best known of the SBA and includes financial assistance for small businesses with special requirements. This is a good option if you plan to buy a commercial property.
These are the requirements to apply for the loan that best suits the needs of your business:
- Be a for-profit organization
- Be considered a small or medium-sized business, as defined by the SBA
- Engaging in or proposing to do business in the United States or its territories
- Demonstrate the need for a loan
- Use the funds for commercial purposes
- Not be behind on any existing debt owed to the government of the United States or its territories, including Puerto Rico
Here we share an infographic so that you can learn more about these loans:
