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Beyond the Rhetoric


You cannot start a business without money. Where does this money come from? You can save or borrow. Those are the two most popular ways. One must be careful in finding the best terms to borrow funding. Our federal government has one of the best programs open to the public. It is the Small Business Administration’s lending program.

There has been so much confusion on just what this program is about.  Fortunately, we have discovered one of the best explanations on what it is and how to take advantage of it. We want to share this valuable explanation.

By Randy Duermyer

Updated April 05, 2018

“A variety of SBA loans are available that are guaranteed by the US Small Business Administration – SBA – offers numerous loan programs to assist small businesses. Keep in mind however, that the SBA is typically not a lending institution. Instead, it guarantees loans made by private banks and other lending institutions.

Basic 7(a) Loan Guaranty SBA Loans

The SBA’s Basic 7(a) Loan Guaranty program is what immediately comes to mind when someone mentions SBA loans. It’s the primary loan program the SBA offers to help qualified small businesses secure loans that they might not otherwise qualify for through normal lending channels without the government’s guaranty. It is also the most flexible of the SBA loans offered by the SBA because 7(a) SBA loans can be guaranteed for a variety of general business purposes.

Money secured through Basic 7(a) SBA loans can be used for a variety of business purposes including funding for working capital, machinery and equipment, furniture and fixtures, land and buildings, tenant improvements under lease agreements, and, under special conditions, refinancing prior debt. Basic 7 (a) SBA loans can run for maturity periods of up to 10 years for working capital and generally up to 25 years for fixed asset financing.

SBA loans under the 7(a) program are made to existing small businesses as well as start-up companies through commercial lending companies. The vast majority of small businesses are eligible to qualify for these loans provided they:

•   Intend to operate for a profit

•   They are engaged or plan to engage in business within the United States or its possessions

•   Have some owner equity of their own to invest in the business

•   Look to alternative funding methods first – such as personal assets

Of course, not all small business will qualify for 7(a) SBA loans, but the SBA provides multiple variations of the program to accommodate certain targeted needs. For example, the Patriot Express Loans from the SBA are specifically geared for fast approval of 7(a) loans to active-duty and military veterans and their spouses.

More information on SBA 7(a) loans

Certified Development Company (CDC) – 504 SBA Loans

These SBA loans provide long-term, fixed-rate financing to small businesses for the purpose of acquiring real estate or machinery or equipment for expansion or modernization. SBA 504 funding usually includes 10 percent equity from the borrower along with a loan of at least 50% of the total amount from a private-sector lender and a loan provided by a Certified Development Company (CDC)(a private, non-profit corporation that contributes to the economic development of a community or region) in an amount up to 40%, which is funded by a fully guaranteed SBA note and which holds a second lien on the acquired real estate, machinery or equipment.

504 SBA loans are targeted to small businesses that need financing for “brick and mortar” stores or physical plants.

To be eligible for these SBA loans, the business must be operated for profit and not have a tangible net worth in excess of $7.5 million and does not have an average net income in excess of $2.5 million after taxes for the preceding two years. 504 SBA loans nay not be used for speculation or investment in rental real estate.

More information on SBA 504 loans

7(m) SBA Micro Loans

7(m) SBA loans are designed to provide short-term loans of up to $35,000 to small businesses and not-for-profit child-care centers for working capital or for purchasing inventory, supplies, furniture, fixtures, machinery and/or equipment. Proceeds of these SBA loans cannot be used to pay existing debts or for buying real estate. The SBA makes or guarantees a loan to an intermediary (a non-profit community-based lender who also provides management and technical assistance to the borrower), who in turn, makes the loan to the small business.

Harry C. Alford is co-founder, president/CEO of the National Black Chamber of Commerce ®.  Kay DeBow is co-founder, executive vice president of the National Black Chamber of Commerce.  Website:  Emails:

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