How many times have you heard a politician say, "Small businesses are the backbone of the U.S. economy?" Probably a lot, if you've been paying any attention, and the numbers support their case.

This longtime political line is well reflected in the federal government's efforts to promote small business entrepreneurship. Enter, the Small Business Administration.

Along with a myriad of other efforts--including mentoring for entrepreneurs, education about business ownership, and more--the SBA supports America's small business owners through its various loan programs, helping small businesses acquire the funds they need to get started and grow.

What is an SBA Loan?

Contrary to what the commonly used term "SBA Loan" suggests, the SBA actually doesn't directly lend money to small businesses. Instead, the agency works with a number of lenders around the country to guarantee a portion of the loans, providing a better incentive for lenders to approve small business loans.

Typically, the size and relative risk of lending money to small businesses make lenders hesitant to approve these loans. The SBA's role is to increase the chances that small businesses will be approved for loans by mitigating some of the risk for the lenders.

In this capacity, the SBA offers several different loan programs--each designed for different audiences and different purposes. If you're interested in an SBA loan for your business, read on to get the quick facts about each SBA loan program to determine the best choice for your business.

SBA 7(A) Loan Program

Most common out of the SBA's various programs is the 7(a) loan program. This program offers the most open-ended terms and qualifications, making it suited for a wide variety of businesses.

The 7(a) program allows small business owners to borrow up to $5 million in funds for working capital, equipment purchases, purchasing real estate, and even basic startup costs. In some cases, 7(a) loan funds may even be used to refinance existing debt.

Qualification for SBA 7(a) loans is left to the discretion of intermediary lenders and will depend on your time in business, annual revenue, and personal credit score. However, the backing of the SBA does often make lenders more likely to approve term loans through this program than they otherwise would.

The cost of your 7(a) loan will depend on your lender's annual interest rate--guided by SBA maximums--and will depend on your credit history and other eligibility criteria.

In addition to the more common general purpose 7(a) loans, the program also offers a few special purpose loans designed for specific use cases--including for those businesses impacted by the North American Free Trade Agreement (NAFTA), those attempting to expand employee stock ownership programs, and businesses who need funds to implement pollution controls. Learn more about these special purpose loans here.

Microloan Programs

In order to stay profitable and make the best decisions for their own businesses, most traditional bank lenders have a minimum size of small business loans they are willing to service. This lower limit presents a challenge for many solopreneurs and micro-entrepreneurs who need just a small jump start in funding--typically under $50,000--to get their businesses off the ground.

To address this challenge, the SBA created the microloan program to provide lending opportunities for entrepreneurs in need of between $500 and $50,000 in funding. The average microloan amount is about $13,000.

These loans are designed for businesses who have never before received a bank loan and who have low or no business credit history.

Interesting to note is that the microloan program is actually the only loan program for which the SBA actually provides the funds for many of the loans. The agency provides a certain budget of funds to various intermediaries throughout the country, which in turn use those funds to finance microloans for small business owners.

CDC/504 Loan Program

If you're looking for funding to make a major fixed asset purchase for your business--such as large equipment, land improvements, or the purchase or renovation of an existing building--you may be interested in the SBA's CDC/504 loan programs. This program allows borrowers to take out up to $5 million for the purpose of acquisition and improvement on any fixed business asset.

CDC/504 loans carry repayment terms of up to 20 years, with interest rates based on current treasury rates--plus fees of approximately 3% of principal. Because they are the most highly regulated out of any of the SBA's loan programs, well established small businesses with a long and strong credit history will be best suited for these loans.

Disaster Loans

The final loan program in the SBA's arsenal is one we sincerely hope you never need to use. Nevertheless, if the occasion does arise, it's helpful to know that this resource exists.

SBA Disaster Loans are low-interest debt financing solutions designed to help businesses of all types and sizes deal with the high recovery costs associated with declared disasters and catastrophic events.

If your business is affected by a declared disaster, you can use these funds to re-supply inventory, repair or replace fixtures and equipment, and rebuild destroyed real estate owned by the business. It's not a substitute for insurance, but if your business faces recovery expenses beyond that which your insurance plan covers, a disaster loan may help fill in the gaps as you rebuild.

Choosing the Right SBA Loan For Your Business

Ultimately, deciding whether to pursue an SBA loan for your business--and if so, which loan program is best--will depend on a number of factors that only you can know for sure. While the SBA's programs are highly beneficial for many business owners, it's important to note that these loan programs come with a lot of paperwork, and applications can take awhile to be processed. If you're in need of cash quickly, an SBA-backed loan may not be your best bet.

But if you're willing to wait patiently for long-term funding at an advantageous interest rate, an online lending broker or your local lender can help you choose the best SBA loan program for your needs and submit an application accordingly.