106 loan
When it comes to financing your business, a loan can be crucial in helping you achieve your goals. However, with so many options available, it can be challenging to find the right type of loan that suits your needs. That's where the 106 loan comes in.
A 106 loan is a type of Small Business Administration (SBA) loan designed to help businesses that are unable to secure traditional forms of financing. This type of loan is offered through the SBA's Community Advantage Program and is tailored to businesses located in underserved communities.
The advantage of a 106 loan is that it provides funding for businesses that may not meet conventional lending requirements, such as a strong credit history or collateral. Instead, the loan is based on factors such as the borrower's character, business experience, and ability to repay the loan.
As mentioned, the 106 loan is targeted towards businesses located in underserved communities. To qualify for this loan, your business must meet the SBA's size standards and be located in a designated Community Advantage area.
Additionally, your business should demonstrate that it is unable to obtain financing through conventional sources. This might be due to reasons such as lack of collateral or credit history or other factors that make it difficult to secure a loan through traditional channels.
The maximum amount you can borrow through a 106 loan is $250,000. This loan must be used for business purposes such as working capital, inventory, or equipment purchases.
Additionally, the SBA requires that you use the loan proceeds in a way that benefits your local community. This might include creating new jobs, supporting economic development, or providing services to underserved populations.
The repayment terms for a 106 loan can vary depending on your individual circumstances. However, the interest rates for these loans are typically between 7-8%, which is lower than many other forms of alternative financing.
The loan repayment period can range from five to ten years, depending on the amount borrowed and the intended use of the loan. The SBA may also require a personal guarantee from business owners or managers to ensure that the loan is repaid.
If you're ready to apply for a 106 loan, you'll need to follow a few steps. First, you'll need to confirm that your business is located in a designated Community Advantage area. Then, you'll need to gather the necessary documentation, including your business plan, financial statements, and tax returns.
Next, you'll need to find a lender who is approved by the SBA to offer 106 loans. This might include banks, credit unions, or other financial institutions. You can use the SBA's Lender Match tool to find potential lenders in your area.
Once you've found a lender, you'll need to complete the loan application and provide any additional documentation required. The lender will review your application and determine if you qualify for the loan. If approved, you'll receive the funds and begin repaying the loan according to the agreed-upon terms.
A 106 loan can be an excellent option for businesses located in underserved communities that may not have access to traditional financing. By working with the SBA and approved lenders, you can secure funding that helps you grow your business and create economic opportunities in your local area.