What Type of Small Business Loan Do You Need?

Every business is unique, from its size to operating costs to credit histories. Finding, applying for, and securing the right loan for your business will depend on these factors and many others. So which loan is right for your needs? Here's an overview of some of the loan programs available.

Basic 7(a) SBA loan. These loans are guaranteed by the SBA, but issued through approved lenders. Because they are guaranteed by the SBA, 7(a) loans are relatively easy to qualify for. You can receive up to $750,000, but you will probably be required to personally guarantee the loan.

504 SBA loan. If you have solid assets and can show how your business will create jobs in the community, consider a 504 loan. These loans are offered directly through approved local economic development agencies. The financing agency is limited to 40 percent of the project, not to exceed $1 million. Where Can You Get Help Before Applying for an SBA Loan?

Community Adjustment and Investment Programs (CAIPs). Similar to 504 SBA loans, the CAIP loan is intended to protect or create jobs. However, you must show that your business is at risk due to trade pattern changes in Canada or Mexico.

LowDoc. As the name implies, the LowDoc keeps paperwork to a minimum ? the application document is only one page long, and processing is generally quick. The LowDoc focuses on the applicant's character and personal credit, making it a good choice for businesses that have not yet established a credit history. You can apply for LowDoc loans for up to $100,000.

SBA Microloans. If you need $25,000 or less to fund your business, contact your local economic development agency for a microloan. Interest rates are generally high on these loans, but they can often be just what a business needs to get it through a rough patch.

Home equity. If you are comfortable securing your loan with some or all of your home's equity, you can take out a home equity loan. Before you stake your house on the prospects of your business, make sure you know how much working capital you'll need, and calculate the amount of business you'll have to do to ensure that you don't lose both your home and your business. Should You Personally Guarantee a Loan to Your Small Business?

Industry-specific loans. Depending on your business, you may be able to select from among loans designed for industries and trades.

• CAPLines consist of five loan programs for financing the short-term and cyclical working capital needs for various small businesses, including seasonal, contract, standard-asset-based, and small-asset-based businesses. These loans are generally guaranteed for up to $750,000 by the SBA.
• International trade loans (ITLs) offer short- and long-term financing to small export businesses. The SBA can guarantee up to $1.25 million for a combination of fixed-asset financing and working capital.
• Pollution-control loans might be the answer to your financing needs if your company designs, builds, installs, or services pollution-control facilities.