SBA Loan Process

Quite often, when a company needs a business loan, their first step is to contact the lender where they do all their business banking. They inquire about a conventional or traditional commercial loan. As the name suggests, this is the most common type of commercial loan. The company feels comfortable using a familiar lender and receiving a familiar loan. However, quite as often, this is not the right loan. There is a better way: The SBA 504 loan program.

We have previously discussed the SBA 504 loan program and how it was created to help small businesses get the financing they need to promote job creation and retention. The Small Business Administration established the Certified Development Corporation Program to finance these loans, since the SBA does not loan money directly.

Community Business Finance's mission is to encourage economic development in the SBA Houston District and throughout Texas. To accomplish this we actively promote the SBA 504 Program to lenders and businesses. We want to foster lender-CDC partnerships for the benefit of Houston businesses.

One of the first things a potential lender will ask to see is your business plan. If you are looking for business financing, a business plan is imperative. It will be impossible to secure an SBA loan without one. Given its importance, a business plan should be regarded as a formal document that is honest and detailed.

Many small businesses use an SBA loan to finance a start-up venture acquire working capital, pay for a building expansion, or purchase new machinery or equipment. Applying for an SBA Loan requires forms and documentation just like any commercial loan. The lender will have the same expectations and you should be prepared to describe your business, how you will use the loan proceeds, and establish an ability to repay the loan.

Finding financing for your new business can be daunting. Start-up companies don't have the financial history that lenders require during the loan process. Banks are conservative lenders and may not be willing to take a risk on a new company. The risk for the lender is lessened with a guarantor. Community Business Finance can help your start-up with SBA Guaranteed Loan Programs.

The SBA Guaranteed Loan Program was created to support and strengthen the small businesses that employ our nation. However, is it is important to realize the SBA does not loan money. A traditional lender, such as a bank, loans the money. The SBA then guarantees a portion of the loan, between 30%-90% depending on the loan type. This is similar to being a loan co-signer. This helps lenders be more comfortable with a loan that they might otherwise not approve, such as a loan for a start up, or a borrower that has less collateral than a bank requires.

SBA 504 loans do not get the same attention as SBA 7(a) loans when looking for financing. This four-part series is intended to help you better understand the uses and benefits of a 504 loan. To learn more, see a comparison between 7(a) and 504 loans. For more details, see our complete 504 School.

Step by Step Process

Community Business Finance works closely with you during the 504 loan process. The following outlines the steps and how we will assist you:

SBA 504 loans do not get the same attention as SBA 7(a) loans when looking for financing. This four-part series is intended to help you better understand the uses and benefits of a 504 loan. To learn more, see a comparison between 7(a) and 504 loans. For more details, see our complete 504 School.

Eligible Use of Proceeds

A small business can use proceeds from an SBA 504 loan for direct expenditures to acquire, construct or convert a facility for company expansion, such as:

SBA 504 loans do not get the same attention as SBA 7(a) loans when looking for financing. This four-part series is intended to help you better understand the uses and benefits of a 504 loan. To learn more, see a comparison between 7(a) and 504 loans. For more details, see our complete 504 School.

Program Benefits

The following are the many benefits of using an SBA 504 loan vs. traditional lending.