SBA (Small Business Administration) Programs

SBA7(a) Loan Program

7(a) loans are the most basic and most used type of loan in the Small Business Administration's (SBA's) business loan programs. All 7(a) loans are provided by lenders who are called participants because they participate with SBA in the 7(a) program.

7(a) loans are only available on a guaranty basis. This means they are provided by lenders who choose to structure their own loans by SBA's requirements and who apply and receive a guaranty from SBA on a portion of this loan. The SBA does not fully guarantee 7(a) loans. The lender and SBA share the risk that a borrower will not be able to repay the loan in full. The guaranty is a guarantee against payment default. Under the guaranty concept, commercial lenders make and administer the loans. The business applies to a lender for their financing. The lender decides if they will make the loan internally or if the application has some weaknesses which, in their opinion, will require an SBA guaranty if the loan is to be made. The guaranty which SBA provides is only available to the lender. It assures the lender that in the event the borrower does not repay their obligation and a payment default occurs, the Government will reimburse the lender for its loss, up to the percentage of SBA's guaranty.

SBA Micro-Loans

The Micro-Loan Program provides very small loans to start-up, newly established or growing small business concerns. Under this program, the Small Business Administration (SBA) makes funds available to nonprofit community based lenders (intermediaries) which in turn make loans to eligible borrowers in amounts up to a maximum of $35,000. The average loan size is about $10,500. Applications are submitted to the local intermediary, and all credit decisions are made on the local level.

SBA (504) Loans

The 504 Program provides growing businesses with long-term, fixed-rate financing for major fixed assets, such as land and buildings. Typically, a 504 project includes a loan secured with a senior lien from a private-sector lender covering up to 50 percent of the project cost, a loan secured with a junior lien from a local or regional community development corporation (backed by a 100 percent SBA-guaranteed debenture) covering up to 40 percent of the cost and a contribution of at least 10 percent equity from the small business being helped.

For more information, contact:
Curt Mowrer, Executive Director
Rend Lake College Small Business Development Center
327 Potomac Blvd, Suite A
Mt. Vernon, IL 6284
(618) 242-5813
(618) 437-5321 x 2001
mowrer@rlc.edu
www.rlc.edu