Sba Loans Essay

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SMALL BUSINESS ADMINISTRATION (SBA) LOAN NICHOLAS YUN WHAT IS AN SBA LOAN? The Small Business Administration (SBA) is a U.S. federal agency that that is dedicated to fostering the growth of small businesses by guaranteeing loans. Instead of providing direct loans to businesses, the SBA provides guarantees to lenders, promising to pay back a certain percentage of a loan to the lender if the borrower is unable to. Guarantees provided by the SBA minimize the risk for lending partners and increase the chance that lenders will loan their money to otherwise risky small businesses. WHAT BUSINESSES QUALIFY FOR AN SBA LOAN? The government’s qualifications for SBA-guaranteed loans are the following: * Your business must have been unable to secure reasonable private financing from normal lending channels * Your business must be in the U.S. and must be a for-profit company * Your business must meet the SBA’s size requirements of a “small” business (based on industry, financials, number of employees, etc.) * Your business must meet requirements specific to the lender (strong business plan, credit qualifications, sufficient investor from owner, collateral, ability to repay, etc.) WHAT SBA LOAN PROGRAMS ARE THERE? The three primary loan programs with guarantees from the SBA are: * 7(a) Loan Guarantee Program: * Loans of up to $5 million administered through bank and non-bank lending institutions * Guaranty is 85% of loans up to $150,000 and 75% of loans greater than $150,000 * Used for general purposes such as purchasing working capital, debt refinancing, furnishings, equipment, real estate, etc. * CDC/504 Fixed Asset Financing Program: * Loans of up to $5 million administered through non-profit Certified Development Companies * Provides funding for purchase or construction of real estate, equipment, and
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