Business Knowledge

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What's involved in getting a SBA Loan

How to Get a SBA Loan

The Small Business Administration (SBA) Loan Program helps meet the working capital or expansion needs of growing small businesses. The SBA Loan Guaranty Program insures private lenders of entrepreneurs for loans 80 percent up to $100,000 and 75 percent for larger loans.

Lenders are typically banks. They apply on behalf of the small business, their customer, to the SBA Loan Program. Usually, loans for working capital mature at between 5 and 7 years. Fixed asset loans, for things like buildings, have longer maturities.

Banks will only seek SBA loans for customers they deem creditworthy. They will prepare and submit a loan package with your loan request as well as the bank's analysis of your credit and plan. An independent review conducted by the SBA will determine eligibility, creditworthiness, business financials and ability to repay.

Not all banks regularly work with the SBA. While many banks have agreements, only about half regularly lend and apply for SBA loans. Only a quarter of those follow up actively. Make sure to choose a lender with SBA loan experience.

Interest rates are regulated, but still vary. Loans maturing in under 7 years can have rates up to prime plus 2.25 percent. Longer term loans can have rates up to prime plus 2.75 percent.

Loan programs from the SBA directly to the end customer are only available to Vietnam era veterans and other veterans with compensated disability rating of 30 percent or more.

Be fully prepared and organized in order to maximize your chances of a successful SBA loan application. The loan process is generally less painful if you already have a business relationship with the bank to which you apply. Prepare a business plan. Include financial projections for cash-flow, balance sheets and profit and loss statements. First year projections should be monthly, then annually for the next few years. Put together personal financial statements for all principals. Report collateral with market value estimates. When you have your information together, make an appointment and present your materials and application to your loan officer. If you're initially denied, ask about the SBA Guaranty Loan Program.

Get more information from the SBA business development division, the SBA website, or by getting a copy the SBA Business Loans brochure. Another small business lending option is a local private small business investment company (SBIC). They are SBA licensed to serve entrepreneurs with long-term loans and equity capital. A list of SBICs is also available through the SBA.

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