Is an SBA Loan Right for Your Business?

The U.S. Small Business Administration (SBA) provides a number of financial assistance programs for small businesses.  This posting provides information about the SBA guaranteed loan programs.  The SBA does not lend money to small businesses, but guarantees loans made by SBA partners, primarily lending institutions (banks, community development organizations, etc.).  The SBA’s guarantee is the inducement for lenders to make loans that they otherwise would not make.  The SBA guarantees that the loans will be repaid thus eliminating the risk to lenders.  The SBA sets guidelines and requirements for the loans to fulfill the SBA guaranty.  SBA loans will not be made to businesses if the borrower has access to other financing on reasonable terms.  SBA loans can provide financing to qualifying fledgling small businesses and start-ups when they are unable to secure conventional financing.

There are several types of SBA loans available to small businesses:

• General small business loans 7(a).  This is the SBA’s most common loan program and can be used to purchase equipment, renovate your facility, access working capital and other special needs.
• Microloan program.  Can be used to obtain a revolving line of credit, or term loan for short-term working capital and other purposes.
• Real estate and equipment loans CDC/504.  This type of loan can be used to finance major fixed assets such as equipment or real estate with terms of up to 20 years.

As an incentive to help make financing more available to small businesses the SBA is waiving its guaranty fee on loans of $150,000 or less through September, 2014.  This can result in a savings of more than $2,500 on a $150,000 loan.  Also, effective January 1, 2014 the SBA launched a program for small business owners who are veterans, the SBA Veterans’ Advantage, which waives fees on loans up to $350,000.  This program is also available through September, 2014.

The National Small Business Resource Guide which can be accessed from the SBA website, www.sba.gov, can be helpful in deciding whether to seek an SBA guaranteed loan for your business.

Please see my blog posting dated February 11, 2014 for steps to take before talking to a business banker to see if you qualify for an SBA guarantee.