SBA Loans

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If you can't qualify through private lending, then the valuable government SBA loan program is just for you. You'll get less money than you would with commercial banks, but their policies against your equity and collateral won't be as harsh. The SBA is not the lending institution itself. It will help you prepare your loan application, and then submit it to banking institutions. The SBA meanwhile acts as a guarantor to repay a percentage of the loan to the banks if you're not able to do so yourself. If you own at least 20% equity in your business, the SBA will require you personally guarantee the loan. Are You Eligible? To be eligible for an SBA loan, you must have applied for and been denied a loan from a traditional lender (e.g. commercial bank). Your company must also be for-profit, independently owned and operated, not dominant in its industry, and have under 500 employees. What the SBA Wants Like lenders, they'll want to see that you can repay the loan. Then, they'll analyze your credit score, experience, management expertise, and collateral. If you've put a significant personal investment into your company, they'll see that you're willing to work hard to make your business succeed -- giving your application a great boost. The following describes the different loan programs offered by the SBA. 7A Loan Guaranty It's the most popular government SBA loan program of applicants. It's also the most flexible because you can use the loan for a variety of different purposes. These include working capital, furniture, fixtures, equipment, land, buildings, and leasehold improvements. The SBA can guarantee up to $1 million of the loan amount. You can repay the loan on working capital up to 10 years. For fixed assets, it's 25 years. LowDoc Standing for "low documentation," the LowDoc is the quickest processed government SBA loan. It's for you if you're seeking under $150,000, can prove a great company cash flow, and have a good credit rating. The LowDoc is usually a one-page application, and the turnaround is a quick 48 hours. Don't think you have no chance at getting one. 90% of applicants get some kind of financing. CAPLines CAPLines are short-term loans needed for working capital. SBA guarantees loans up to $1 million. CAPLines come in two varieties: revolving and nonrevolving lines of credit. With revolving credit, your balance each month depends on the amount of money you've repaid. With nonrevolving credit, you pay a fixed amount over a set period. 504 Loan This type of loan is at a fixed rate, and long-term. It's intended to finance fixed assets such as equipment or real estate. Small business owners use the 504 Loan to expand or their businesses. Usually, you'll have to provide at least 10 percent equity into the loan. MicroLoan If you're not looking for much and don't qualify for commercial lender loans, a MicroLoan is just for you. You can use the MicroLoan to finance from as little as $100, up to $35,000. You can't pay existing debts with it, but you use it for equipment, inventory, supplies, fixtures, and furniture. The government SBA loan is a great option if you don't qualify for commercial bank loans.

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Posted on February 18

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