Expand your opportunities: Get to know the SBA loan programs

Learn about the features and benefits of the SBA 7(a), 504, and Express loan programs including how each program works, and how you can take advantage of them to meet your business needs.

Duration:

Share Menu attached Email Facebook Twitter LinkedIn | Print
Expand your opportunities: Get to know the SBA loan programs : Play Video
Play Video
Use the left and right arrows to rewind and fast forward
Mute volume Use the left and right arrow keys to turn the volume up and down Rewind video 5 seconds
 / 
Fast forward video 5 seconds Turn closed captioning off
Published: May 09, 2014
Updated: December 08, 2016

DAVE KANEDA:

Business owners want to know about any opportunity that can help them succeed. The Small Business Administration makes possible some great lending options that can help them finance their business, but if you've never applied for an SBA loan, the range of possibilities might seem a little confusing. 

As the nation's largest SBA 7(a) lender in dollar volume since 2009, we've closed thousands of SBA loans. So, we can help you understand how to take advantage of the program.

Hi, I'm Dave Kaneda.

MARY NORRIS:

And I'm Mary Norris.

KANEDA:

Today, we're going to demystify how the various SBA loans work, and what they're for.

First, what's the difference between SBA loans and other business loans? 

NORRIS:

SBA loans are a lot like conventional business loans. You actually apply for both kinds through banks and other lending institutions. But because SBA loans are backed by the government, they allow lenders to be more flexible about features like down payments, repayment terms, and collateral. One area where they're not different is in how you qualify. You need to show that your business is creditworthy, just like for a regular loan.

KANEDA:

Generally speaking, SBA loans can also be used for the same purposes as typical loans — to build working capital, finance a project, purchase a building, etc. 

Now, what are the types of loans available? 

NORRIS:

First, let's talk about SBA 7(a) loans. This is the flagship program that's probably the most popular. These are loans that can be used for most business needs such as buying a piece of property or equipment.

The terms for these loans are generally longer because they're designed to fund business start-up, working capital, business acquisition, and real estate. 

KANEDA:

With an SBA 7(a) loan, we can even combine all those uses in one loan, which can be a very convenient approach. 

NORRIS:

That's right. We look at 7(a) loans as another set of options in our toolkit to help business owners succeed. The longer term means lower monthly payments, which can be a key benefit to help preserve your cash flow.

KANEDA:

What are some of the advantages of an SBA 7(a) loan?

NORRIS:

Because these loans are guaranteed by the government, they offer terms that can be more flexible than a conventional bank loan. For example, SBA loans may have a lower down payment while conventional loans usually require substantial down payments on a project. SBA loans may require less. 

For instance, at Wells Fargo, we can offer SBA loans with up to 90% financing on commercial real estate that you will be occupying.

KANEDA:

SBA loans also have longer terms and amortizations, including up to a 25-year term on owner-occupied real estate.

NORRIS:

These two key features mean that projects can be more affordable for business owners. And to avoid any surprises, SBA loans never have a balloon payment. They are always fully amortized. 

KANEDA:

So, what's an example of a small business owner's need that a 7(a) loan might meet?

NORRIS:

As I mentioned earlier, the 7(a) program can generally be used for most business purposes, including purchase or improvements of commercial real estate, acquisition of an existing small business, buying equipment or machinery, and working capital or start-up needs. It can even be used for a combination of these, such as expanding to a new location, building the business out and getting it ready to open. 

KANEDA:

For smaller, shorter-term needs, there's also the SBA Express. This is part of the 7(a) program, but features a streamlined application process to help businesses access funding more easily. 

What's an example of a small business owner's need where the SBA Express might be a good fit?

NORRIS:

SBA Express may be a good fit for those seeking operating capital. Lenders generally use SBA Express in situations where a line of credit may also be helpful. 

KANEDA:

And, finally, there's the 504 loan. 

NORRIS:

The 504 loan is another loan program from the SBA and is typically used for the purchase, or construction of large buildings or for big equipment or machinery purchases. It provides longer term financing to purchase commercial real estate, or to expand existing operations. These projects may have a big impact on the local economy, and may potentially create jobs.

KANEDA:

What's an example of a business owner's need where a 504 loan is the best option?

NORRIS:

The 504 loan is for businesses in almost any industry, including those that are new or in start-up mode, that are looking to build or purchase their own building or a large piece of equipment. The program provides the benefits of an SBA loan, long terms and low down payments, with the fixed rate features needed for a big purchase. 

KANEDA:

How can business owners determine what kind of loan or line is right for them?

NORRIS:

The key is to work with a banker who has real experience in business credit, including SBA lending. To get started, you need good credit, you need capital, and you need a clear goal.

KANEDA:

The banker's job is to work with you to match up your business goals with the right loan program.

NORRIS:

That’s right. Your banker will talk with you about short- and long-term financing options to meet your needs. For example, if you have a short-term goal or need for cash, the banker can offer a loan so that it can be repaid in a short term. If you have a long-term goal instead, such as purchasing a building, the banker wants to make sure you can repay that loan over the long term. Knowing the difference between short-term and long-term uses of credit will help you choose the right loan.

KANEDA:

Can I apply for an SBA loan even if I have other business loans and lines?

NORRIS:

Absolutely! SBA loans simply give you more financing options to consider as part of your overall financial plan.

KANEDA:

Thanks for visiting the Wells Fargo Works for Small Business site. To learn how the application process works, check out the video on “Applying for an SBA Loan,” as well as other videos on how to build a strong credit profile and apply for credit.

Finally, to learn more about how Wells Fargo business banking can help you, visit wellsfargo.com/biz. We wish you continued success.