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By Debbie Gregory.

In this series of articles, we examine the financial options and program available to business owners to fund their business.

In the three previous articles, we have looked at self-funding, venture capital and crowdfunding. In this final installment, we will look at Small Business Loans.

Once you have your business plan together, including your expense sheet and financial projections, contact various banks and credit unions and compare terms they are offering for small business loans.

Loans guaranteed by the U.S. Small Business Administration (SBA) are very popular since they are guaranteed if you meet the qualifications, including meeting the government’s definition of a small business for your industry and already having been turned down for a loan on your own from a bank or other financial institution.

The SBA’s mission is to further the growth and development of small businesses throughout the country. However, the SBA doesn’t lend money directly to small business owners. Instead, it sets guidelines for loans made by its partnering lenders, community development organizations, and micro-lending institutions.

SBA-guaranteed loans generally have rates and fees that are comparable to non-guaranteed loans, lower interest rates, longer repayment terms, as well as manageable fees. And many of the SBA programs come with continued support to help you start and run your business.

There are three different kinds of SBA loan programs, each with their own terms, conditions, and advantages:

  • SBA 7(a) loan, which is the most popular loan type, can be for loans as high as $5.5 million in cash with terms up to ten years.
  • CDC/504 loans, which are meant specifically for purchases like real estate and machinery with terms up to 25 years.
  • SBA microloans for a max of $50,000, which can be repaid for up to six years.

You typically need to have a 680 or higher personal credit score and ability to repay, 1.25 times or better debt-service coverage ratio (DSCR), the measurement of the cash flow available to pay current debt obligations, to get an SBA loan.

Veteran and Military Business Owners Association, VAMBOA,