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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 33.2 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 minorities. If you are thinking about starting a small business in Massachusetts or Rhode Island or are a small business looking for a loan, this article will explore the most popular types of SBA financing available.

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 lender, like Bristol County Savings 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 Bristol County Savings Bank, you’re technically applying for a Small Business 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 Loan Size in 2022: $538,903
  • 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. You can use a SBA 504 loan from Bristol County Savings 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 you can’t use an SBA 504 loan for working capital or to or inventory, consolidating, repaying, or refinancing debt, speculation or investment in rental real estate.

SBA Disaster Loans

If disaster strikes down your Massachusetts or Rhode Island business or home, you can turn to the SBA and Bristol County Savings 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.

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 center 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 learn about the SBA loan requirements and details is to work directly with the Bristol County Savings Bank Small Business Banking Team.

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