Procuring a Small Business Loan through the SBA
One of the main reasons individuals decide not to go into business is due to a lack of funding. At least that is what they perceive to be the reason. The real reason is that they simply do not know what kind of funding is out there and they do not know how to obtain it. One of the best tools for obtaining funding is by contacting your local Small Business Administration.
Not only does the SBA, or Small Business Administration, help small business owners find funding; they also offer SBA loan guarantees. These can be just the tool you need to fund your small business.
The SBA guarantee loan program works much in the same way as a student loan guarantee. The loan is actually procured through a commercial lending facility. However, the SBA helps by offering their guarantee to the lender. In the event that you are unable to pay the loan, the SBA will be responsible for a portion of the loan. This takes some of the risk out of lending you money allowing you to gain more capital for your small business.
Most small businesses qualify for the SBA loan program. However, it is important to do your research first, since there are a few types of businesses that do not qualify. Generally, you should be in business for the purpose or creating a profit and you should be operating your business within the U.S. or its territories.
You can pick up an application for your SBA loan at your local SBA office. You can also find these forms on the internet. However, lenders who currently partner with the SBA will have these applications on hand. In fact, receiving this application at your lending institution where they can offer live advice is probably the best way to go.
In order to qualify for a SBA loan you will need to have some of the following basic requirements. You will definitely have to have the ability to pay the loan. However, the equity you have invested in your company, the collateral you have on hand, and your moral character may also factor into the decision making process.
The process for obtaining a SBA loan will involve finding a lending institution. There are actually three types of SBA loan programs and a qualified lending institution will be able to help you decide what is right for you. When meeting with your lender you should have the following items:
• Your business plan
• Your personal financial statements
• Your business financial statements, (if applicable)
• Collateral to secure the loan
• Your projected earnings statements
• Resumes for the management involved in your business
• Pro-forma balance sheets, (anticipated for the business using the capital)
If you do not have collateral, you are not automatically denied. Collateral can be based on the ability of your small business to repay the loan through its profits rather than cash on hand. However, every owner that holds 20 percent or more of the small business must personally guarantee the SBA loan.
The interest rate for SBA loans varies. This is because the SBA only sets the maximum rate that the lender can charge. The actual rate depends on the lender. The amount of time you have to pay back the loan is determined by a number of factors including the cash needs of your small business and the assets being financed. Loans can be granted for between five and twenty-five years based on the above factors.
In the end, receiving a SBA loan may be just what your small business needs. The best way to find information about these loans is to visit a participating lender, or your local SBA office. You can also visit the website to find information or to find contact information for your SBA office or participating lenders.