Positive economic signs are fueling brisk business lending across the U.S. During the first quarter, commercial and industrial loans increased 8.5 percent, according to the FDIC, and SBA loans set a record in 2014 with a 12 percent increase in 7(a) loans. However, many business owners don’t realize the amount of options available, including the combining of conventional loans.
SBA loans can be up to $5 million, while limits for other government-backed loans from the U.S. Department of Agriculture and Farm Service Agency vary.
General Small Business Loans: 7(a) – Used to start a business or for acquisition, operation or expansion of an existing business, including farms. Terms are up to 25 years for real estate and up to 10 years for equipment and working capital. Fees range from 0 to 3.75 percent and interest rates may be fixed or variable.
CDC/504 Loans – Intended for for-profit companies that have a net worth of less than $15 million and average net income of less than $5 million after taxes for the preceding two years. They can be used to purchase equipment, machinery or property; for improvements; or for new construction or renovation. Terms are up to 20 years. Fees are about 3 percent, while interest rates are pegged to five- and 10-year U.S. Treasury issues.
Microloan Program – Provides loans up to $50,000 for small businesses and certain not-for-profit childcare centers for working capital, equipment or supplies, furniture, fixtures, machinery or equipment. Interest is 8 to 13 percent.
Disaster Loans – Low-interest, long-term loans for damage from a declared disaster. Terms are up to 30 years, with interest rates of 4 to 8 percent.
USDA Loans – Can be granted for agricultural uses, but often go to other types of rural businesses for working capital, machinery and equipment, or buildings and real estate. Terms are up to 30 years, with a limit of $25 million. Fees are 3 percent and interest rates are negotiable.
FSA Loans – Available to farmers or ranchers for operations, cattle, equipment, real estate or loss due to natural disaster, for up to $1,392,000. Interest rates, fees and terms vary.
For more information about government-backed loans, visit: www.sba.gov, www.fsa.usda.gov or www.rd.usda.gov.
-Scott Moseley is regional market president at Wisconsin Bank & Trust.
