SBA Financial Assistance Programs
By Lee Cornelison

Each year the U.S. Small Business Administration (SBA) provides financial and management assistance to help more than a million small business owners and entrepreneurs. The SBA makes neither grants nor direct loans to small business, but instead provides loan guarantees when financing is not available through normal lending channels. The proceeds of SBA guaranteed loans can be used for most business purposes – the purchase of real estate to house the business; construction, renovation or leasehold improvements; acquisition of furniture, fixtures, machinery, and equipment; purchase of inventory and working capital.

SBA has a variety of small business loan guaranty programs.

The 7(a) Loan Guaranty Program is SBA's primary lending program. It is available through most all private-sector lenders and provides a partial loan guaranty. For applicants meeting the SBA's credit and eligibility standards, the Agency will guaranty 85 percent of loan amounts to $150,000 and up to 75 percent of loans between $150,000 and $2,000,000.

SBAExpress is a streamlined guaranty process available only through approved lenders. Currently 19 banks in North Carolina are approved. These lenders receive a reduced guaranty of 50 percent on their loans in exchange for the ability to use their own procedures and forms. The maximum size of an SBAExpress loan was raised to $2,000,000 in FY 2004.

The 504 Certified Development Company (CDC) Program provides businesses with long-term, fixed-rate financing for fixed assets. Projects may include the purchase of land, construction of new facilities, renovating or converting existing facilities or purchasing long-term machinery and equipment. The program cannot be used for working capital or inventory, consolidating or repaying debt or refinancing. Generally, the project assets being financed are used as collateral. A 504 loan is packaged by a Certified Development Company, which is a nonprofit corporation set up to contribute to the economic development of a region. CDCs are licensed by SBA to administer 504 projects, which are funded partially by the sale of SBA guaranteed debentures and partially by private-sector lenders.

The Export Working Capital (EWCP) Program was designed to provide short-term working capital to exporters. The EWCP can also be processed with streamlined documentation. Details about this program and SBA’s International Trade Loan Program can be found at the Carolinas Export Assistance Center.

Additional information on all SBA loan programs, as well as management training and counseling services, is available at the SBA North Carolina District Office. Lee Cornelison is District Director for the Small Business Administration.