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How To Get An SBA Loan
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The SBA offers many special programs and activities to encourage the success of small business. Some of these are counseling, making available various databases of useful business information and other forms of business assistance. One of the SBA’s most important and well known programs are SBA loans.
The SBA offers many special programs and activities to encourage the success of small business. Some of these are counseling, making available various databases of useful business information and other forms of business assistance. One of the SBA’s most important and well known programs are SBA loans.
What Are Small Business Administration (SBA) Loans
Money is the life blood of any business. Very often, a business will need to take a loan for various reasons. While banks and other financial institutions make business loans, it is often harder for a typical small business to secure such a loan. The SBA helps these businesses obtain loans by guaranteeing the repayment of a major portion of such loans, to qualifying businesses. Such loans are made directly by SBA approved lenders, such as a local bank, with the SBA serving as a guarantor of the loan. This loan guarantee lowers the risk to the lender and therefore encourages the making of such loans.
Also, the SBA has certain rules and guidelines that the lender must follow, that ensure that the terms of the loan, such as the interest rate, any fees and payment details are fair and beneficial to the business borrower.
Types of SBA Loans
The most common types of SBA loans are:
– SBA 7(a) loans: Maximum loan amount of 5 million dollars. Loan can be used for working capital, expansion and equipment purchases.
– SBA 504 loans: Maximum loan amount of 5.5 million dollars. Loan can be used for the purchase of long-term, fixed assets like land, machinery and facilities.
– SBA Express loans: Maximum loan amount of $500,000. This is a faster funding loan, for working capital, expansion and real estate and equipment purchases.
– SBA Microloans: Maximum loan amount of $50,000. Smaller loan that can be used for working capital, inventory, supplies, equipment and machinery.
Requirements For SBA Loans
Basic qualifying requirements for SBA loans include:
– Being a legal, fully registered and licensed for-profit business, located and operating within the U.S.
– That the business meets the definition of being a “small business” as defined by the SBA.
– That the borrower is an active owner with time and money invested in the business.
– That the borrower(s) have not defaulted on any government loans in the past.
– That the borrower has no other viable sources of funding.
Application Details
SBA loans involve putting together and submitting a bunch of required forms and documents, known as a loan package. This can be daunting for many people, but free assistance is available through local business groups and even the SBA itself. There are also loan brokers, who for a fee, will help you expertly complete and submit the loan package. The following are the common required documents and necessary information:
– SBA’s borrower information form.
– Statement of personal history.
– Personal financial statement.
– Personal income tax returns.
– Business tax returns.
– Copies of all business licenses and permits.
– Copy of business premises lease or mortgage.
– Full business financial statements, including a one-year cash flow projection.
– Business Plan(s)
– Personal loan guarantee – from all owners.
