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John Smith is interested in establishing his own franchised business, which he has determined will cost $250,000 to start. However, he’s uncertain if he will meet the required conditions of conventional financing. Due to its start-up nature, his long-term banker, Jane Williams, suggests that John use the SBA 7(a) guaranty program. Here’s how it works: Business Development Corporation will finance 90% ($225,000) of the total project, leaving John with only a 10% ($25,000) down payment. Note that these percentages are subject to change.

ABC Enterprises has been leasing a 10,000 square-foot retail space for five years. A comparably-sized building on the same block has just gone on the market for $1,000,000. ABC’s owner, John Smith, wants to make an offer on the building, but he’s uncertain if he can come up with the 25% ($250,000) down payment that would be required with conventional financing. Jane Williams, his long-time lender, has the solution: an SBA 504 loan! Here’s how it works: the bank will finance a $500,000 first mortgage for 50% of the cost, and Certified Development Corporation will finance a $400,000 second mortgage SBA 504 loan for 40% of the cost. Therefore, Mr. Smith’s down payment will only be $100,000, allowing him to conserve his working capital and expand the business. Note that these percentages are subject to change.