WPK1 Consulting

Two programs wear the SBA name. They do different jobs.

Start with what the SBA is and is not

The Small Business Administration does not lend your shop money. The SBA guarantees a portion of a loan made by an approved lender, which is why lenders will write files under SBA programs that they might not write on their own paper. The lender still reads your business, still decides, and still holds the relationship. Every honest conversation about SBA money starts there, because a shop owner who thinks he is applying to the government is preparing for the wrong meeting.

The two programs, side by side

The 7(a): the flexible one

General purpose

The SBA 7(a) is the program most shop owners mean when they say SBA loan. It is the general purpose door: buying a business, buying the building it sits in, equipment, working capital and refinancing can all live under a 7(a) file, sometimes combined in a single loan. Owners buying an existing shop reach for it because a purchase is rarely one clean asset; it is a building, lifts, goodwill and a customer list all at once, and the 7(a) was built to carry mixed deals like that. The SBA publishes a maximum loan size for the program; that figure describes the program's ceiling, never what any one shop will be offered.

The 504: the fixed asset one

Long-life assets

The SBA 504 is narrower and proud of it. It exists to finance the long life assets a business stands on: owner occupied real estate and major equipment with a long useful life. It is not a working capital program, and no amount of wanting makes it one. A shop owner buying his building, or building one, is the 504's home ground, usually in a structure where the owner, a bank and a certified development company each carry a piece. If the money you need is for payroll, parts or a slow season, you are reading about the wrong program, and the working capital door is the right one.

What the SBA asks of the owner, whichever program

A few mechanics hold across SBA lending, and a shop owner should know them before he falls in love with a building. The owner puts in equity of his own: SBA files are structured so the buyer has real money in the deal, commonly starting around a tenth of the project on a business purchase, with the exact figure set by the program and the deal. Owners who hold a fifth or more of the business personally guarantee the loan; that 20 percent line is a rule of SBA lending, and it is the same line you will meet in the application. The business must be for profit, operating in the United States, and small by the SBA's size standards for its industry. And when real estate that has housed repair work is part of the deal, lenders pay attention to the property's environmental history, because a shop's past lives in its floor drains and its soil as much as in its books. None of this is a reason to walk away. It is a packing list for the trip.

So why not walk into a bank and ask?

Plenty of shops do, and a good local banking relationship is worth having. The trade is reach: one bank gives you its own answer, on the files it likes to write. WPK1 Consulting introduces established businesses to the Loanable marketplace, where one application is matched across more than 150 lenders and more than 30 products, SBA loans among them. For a shop owner whose file does not match his own bank's favourite shape, that reach is the point. The lenders still decide, approval, amount and terms are theirs, and an SBA file will ask more of you in documents and patience than a working capital application does. What the marketplace changes is how many lenders get to read the file.

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The full explanation of how the marketplace works lives on the campaign home page: https://wpk1.jelanidaniel.com