Business finance in the United States

SBA 7(a): a lender-delivered program

SBA describes 7(a) as a loan-guarantee program delivered through lenders. Listed uses include working capital, equipment, real estate and changes of ownership. Applicants must meet program requirements and the lender’s credit assessment. An SBA guarantee protects the lender within the program rules; it does not eliminate the borrower’s repayment obligation.

Source: SBA: 7(a) program ↗

• Ask the lender to confirm current ownership, eligibility and use-of-proceeds requirements.
• Separate purchase price from working capital, fees and any existing debt being refinanced.
• Get the remaining closing conditions in writing before relying on an approval.

504: fixed assets, not an operating reserve

The SBA’s 504 page describes long-term fixed-asset financing through Certified Development Companies. It explicitly excludes working capital and inventory. A building or equipment project can therefore need a separate operating facility. Treat that separation as a budget issue from the beginning, rather than discovering it at closing.

Source: SBA: 504 uses and exclusions ↗

• Identify the CDC and other financing parties involved in the project.
• Ask which project costs qualify and what contribution is required.
• Budget for the period between closing, installation and productive operation.

Conventional loans and asset-based lending

Bank of America publishes business-loan and credit-line options, while TAB Bank publishes receivables, asset-based and equipment financing. These are examples for research, not a ranking or evidence that a particular applicant qualifies. An asset-based facility should be compared using the borrowing-base calculation as well as its stated limit.

Source: TAB Bank: business lending categories ↗

• Request eligibility rules for receivables and inventory in the actual proposal.
• Ask how customer concentration, aged invoices and reserves change availability.
• Check reporting frequency, inspection costs and renewal conditions.

Worked planning example: a distributor

Illustrative only: a distributor has USD 200,000 of invoices. If the proposed calculation excludes USD 40,000 and advances 80% against the remaining USD 160,000, gross availability is USD 128,000. A USD 10,000 reserve would reduce that to USD 118,000 before existing drawings and fees. These are hypothetical terms; the exercise shows why the facility ceiling is not the same as spendable cash.

Read the obligation behind the payment

Build a calendar using the actual payment frequency. Daily or weekly debits can put pressure on a business paid monthly, even when a quote’s headline cost appears manageable. Ask which legal entity funds the agreement, what collateral is covered, whether guarantees apply and how early repayment changes the balance. A factor-rate quote is not an annual percentage rate.

• Compare net proceeds, every scheduled payment and all compulsory fees.
• Model a delayed customer payment before adding a new recurring debit.
• Use a qualified local adviser to review security and guarantee documents; rules and remedies vary by state and transaction.