SBA Business Loan

By: EconomyWatch Content   Date: 4 December 2009

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The US Small Business Administration (SBA) helps business owners to start and expand their businesses through a SBA business loan program. The SBA does not offer loans directly, but helps business owners to get loans from banks and financial institutions. It is a good option for business owners who find it difficult to get a traditional bank loan for business purposes. When a person applies for a SBA business loan, he/she actually applies for a commercial loan based on Small Business Administration requirements. The SBA guarantees a part of the loan. In case the borrower defaults in paying the guaranteed amount, the lender will be paid by the SBA.

SBA Business Loan Program: Advantages

SBA Business Loans are amortized for the entire length of the term. The term can span seven to 25 years. The major advantage is that one need not make balloon payments. Balloon payments are basically lump sum amounts that commercial banks require from borrowers during the last period of the loan term. Since the loans are guaranteed by the government, the interest rates are very competitive. One can get a small business loan of up to $5000, 000.

Section 79(a) SBA Loan Program

The most commonly used type of SBA business loans is the section 79(a) loans. Section 79(a) of the Small Business Act authorizes the SBA to help small businesses that want to borrow business loans.

This program guarantees a variety of general business requirements for small businesses, including working capital, furniture and fixtures, machinery and equipment and debt refinancing.

One can also use this loan for renovation, new construction and purchase of land and building. The term of this loan is up to 25 years for fixed assets, and 10 years for working capital requirements. Both commercial banks and non-banking lenders offer this SBA loan program with the help of SBA.

A startup business owner should make the list of things, including supplies, hiring employees, rent for the building and others, that are required to start a business. The cost should be estimated carefully so that the business is not under-funded. You can use business calculators available from various commercial lenders to estimate the exact loan amount that is required from a SBA business loan.


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