Let’s Talk SBA Loan Program Choices and What Happens If You Default

Taking a jiffy to navigate through the vast ocean of well-regarded SBA loan programs can sometimes feel like a labyrinth. It’s a matter of searching the one that gives your venture the financial boost it needs while staying aware of what troubles lie ahead if things go sideways. In fact, did you know that 29% of small enterprises run dry on cash and a whopping 82% grapple with cash flow problems? However, there’s no need to be alarmed. There are safety nets in place, courtesy of the Small Business Administration (SBA), designed to buffer small businesses against such hiccups.

The Much-Praised 7(a) Loan Program

Let’s dive into the deep end with the crème de la crème of SBA loan programs, the 7(a) loan. It’s the go-to for enterprises in quest of working capital, asset acquisition, and leasehold improvements, as it offers unrivaled flexibility. It obligates any owner controlling a stake north of 20% to provide a personal guarantee for the loan. The SBA will back up to $5 million or 75% of the loan amount (the lesser of the two) and a maximum of 85% for amounts less than $150,000. For more info on this, take a peek at [the program’s details here](https://www.sba.gov/funding-programs/loans).

And there’s more good news. Lenders aren’t permitted to charge the regular fees often associated with business loans. They may, however, impose a one-off guaranty fee, which they can pass on to the borrower. If less than $150,000 is lent, you could bag a no-fee loan.

The SBA’s Pre-Qualification Program

This program could be your knight in shining armor if your borrowing potential is slightly shaky. It helps potentially less creditworthy applicants get pre-qualified for a loan, which can feel like a breath of fresh air for women business proprietors. If you’re eligible, you’ll need to whip up a business scheme and complete the loan application. After successful pre-qualification, expect the SBA guarantee to make banks view you in a different light.

Did You Know About CAPLines?

This is another well-curated set of revolving and non-revolving credit lines under the umbrella of SBA loan schemes. If you’re seeking working capital for short spells or on a cyclic basis, [CAPLines](https://www.sba.gov/funding-programs/loans/capline-program) may fit like a glove. Having the freedom to increase or decrease your balance according to your company’s needs is a feature that many businesses find appealing.

There’s a buffet of four loans and credit line programs within CAPLines. If your business wrestles with soaring accounts receivable, labor costs, or inventory during peak seasons, the seasonal credit line might save the day. The contract lines of credit offer help by financing labor and materials essential for contract execution.

Hailed the MicroLoan Program

For businesses that only require a modest financial boost, there’s a game-plan in place. The MicroLoan Program is tailored to assist small ventures in securing loans up to a maximum of $50,000. It can be used for acquiring machinery & equipment, supplies, inventory, furniture & fixtures, and even working capital but it cannot cover existing debts or real estate purchases. This program is an escape route for businesses that don’t typically meet the conventional credit standards of lenders.

Diversity in Mind: The 8(a) Business Development Program

The SBA loan programs are Equal Opportunity Lenders. They understand that not everyone starts on an equal footing in business. Hence, the 8(a) program extends a helping hand to certified socially and economically challenged businesses by providing them a ticket to the federal procurement marketplace.

The Beast Known As CDC/504 Loan Program

Cut from the same cloth as the 7(a) Program, this beast is only accessible to small enterprises falling short of $7 million in tangible net worth and under $2.5 million in net earnings. This program specializes in offering funds for asset acquisition (think land, equipment). The funding commonly involves a loan from a bank or alternative lender and a follow-up loan from a Certified Development Company (CDC) – courtesy of an SBA guarantee up to 40% of the asset’s value.

The Downside Of the SBA Loans

Like a double-edged sword, SBA loans can be enticing but also cut deep if things go haywire. In the event of a default, you may be required to cough up a personal guarantee, which can include risking your home or other real estate property as collateral to cover the loan deficiency.

When the Going Gets Tough, Get Todd

If you find yourself in a pickle regarding your SBA loan and you’re unsure which way to turn, hiring an attorney may be an ideal solution. Lawscape and the Lawscape are well-oiled machines in providing real-life resolutions in such matters, [click here for your case evaluation](http://spodeklawgroup.com/).

Why Choose Lawscape For Your SBA or Treasury Debt Issues?

The proof is in the pudding. We’ve assisted numerous clients in resolving their SBA and Treasury debts via Compromise Offer, AWG Hearings, Negotiated Repayment Agreements, and more, without resorting to filing for bankruptcy or risking home foreclosure. We’re federally authorized to serve clients nationwide before the SBA, Bureau of Fiscal Service, Treasury Department, and the SBA Office of Hearings and Appeals. Respect the hustle and let us take you where you need to go.