Comparing Small Business Loan Programs Backed by the SBA

The U.S. Small Business Administration (SBA) was founded as an independent federal government agency to help American businesses get started, compete, and thrive by helping business owners access funding.

Today, there are 31.7 million small business in the U.S., comprising 99.9% of all businesses. The SBA also has a variety of resources available for small businesses, including programs for businesses owned by women, veterans and Native Americans. If you a thinking about starting a small business in NJ or are a small business looking for a loan, this article will explore the most popular types of SBA financing available through Peapack-Gladstone Bank, an SBA Preferred Lender.

Types of Small Business Administration Loans

Although the SBA offers several helpful loan programs and resources, they don’t directly finance business loans. Their role is to create guidelines for loans that an SBA-preferred lender, like Peapack-Gladstone Bank, will underwrite, by offering a “guarantee” to help reduce the risk to the lender since the SBA is promising to pay back a portion of the loan if the business owner defaults. What that means is that when you apply for an SBA loan with Peapack-Gladstone Bank, you’re technically applying for a commercial loan with SBA loan requirements, which helps more business owners qualify for funding where they may not otherwise.

SBA Loan 7a

The SBA loan 7a is generally used to fund the purchase of new equipment, inventory and supplies, upgrading or constructing a new building, covering operating expenses, seasonal financing and other capital needs. This type of SBA financing can also be used to start a new business, acquire a business or expand an existing business. Facts to know about SBA loan 7a:

  • Average 7(a) Loan Size in 2015: $371,628
  • Max 7(a) Loan Cap: $5 million

SBA 504 Loan Program

The Certified Development Company (CDC)/504 SBA Loan is suited for businesses who need financing for fixed assets, such as equipment or real estate. You can use an SBA 504 loan from Peapack-Gladstone Bank to:

  • Buy land or buildings
  • Improve your business’s area (e.g. parking lot, street, landscaping, etc.)
  • Build new facilities or upgrade your current one
  • Buy equipment or machines

Note that can’t use an SBA 504 loan for working capital or to repay debt or invest in a risky real estate deal.

SBA Disaster Loans

When Mother Nature strikes down your NJ business or home, you can turn to the SBA and Peapack-Gladstone Bank for help. The SBA offers disaster loan assistance to help business owners, nonprofits, homeowners and renters receive low interest financing to get back on their feet. If your business was declared a disaster area, then you may apply for a SBA Disaster Loan to help repair or replace the damaged property, up to $2 million. You may also use this SBA loan type to receive a working capital loan to relieve the “economic injury” created by the disaster.  Check the SBA’s running list of current declared disasters, like when Hurricane Sandy devastated the New Jersey coastline and its small businesses back in 2012, to use this loan type.

SBA Microloan

Another SBA loan program is an SBA microloan, which offers up to $50,000 in funding to small businesses and some non-profit childcare centers startups. These loans can be used for working capital, inventory and supplies, furniture or fixtures and equipment or machines. Facts to know about SBA microloans:

  • Average SBA Microloan: $13,000
  • SBA Microloan Cap: $50,000

SBA Loan Requirements

The SBA guidelines for each of their loan programs are very detailed. The criteria range from the size of a business to not owing money to the government, to where your business is run, the character of the small business owner and what a business does to make a profit. The easiest way to wade through the SBA loan requirements and details is to work directly with a Peapack-Gladstone Bank financial representative who specializes in small business loans.