The U.S. Small Business Administration (SBA) provides a number of partially government-backed loans to help stimulate economic development. This is accomplished by providing extended terms and large loan sum availability. The loans can be used to provide working capital or the purchase of inventory, supplies, furniture, fixtures, or machinery, as well as real estate, the construction of new buildings, and/or the renovation of an existing structure.
One of the other things that makes these kinds of loans so attractive to business owners and those looking to start businesses is that the down payments required are often much lower than those of traditional business loans provided by financial institutions.
There are two types of SBA loans that require a down payment:
- SBA 7 (1) Loans
- Certified Development Company (CDC)/SBA 504 Loans
One question that may come to mind if these loans are meant to promote economic growth and are backed in part by the government (so if the business defaults, the loan will be partially repaid), why is a down payment necessary at all? The answer is, if a business owner is investing his or her own money and time into their business, they are more likely to be concerned about the success of that business, and will be responsibly in repaying the entire loan.
However, SBA Loans generally only required a 10% down payment—versus 20% for most other types of business loans—to make it easier for businesses without a lot of working capital to still move forward.
Which SBA Loan is right for your start-up/expansion project? 504 Capital Corporation is a Certified Development Company that specializes in SBA lending. We work with borrowers from start to finish, helping them to understand what’s available to them and what is required to apply. We work with both the Small Business Administration and the financial institutions or private companies that are providing a portion of the loan money.
As a nonprofit company, our sole mission is to assist small businesses, promoting economic development and prosperity for all. Let us help you obtain the financing you need to help your business succeed.