SBA Small Business Loan

By: EconomyWatch Content   Date: 11 December 2009

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An SBA small business loan is offered by a commercial bank and guaranteed by the US SBA (Small Business Administration). When a borrower defaults on the loan, the SBA pays a percentage of the loss. The guarantee is an inducement for the lender to approve loans on flexible terms. SBA helps businesses gain access to capital to expand the economy and the tax base and to create jobs.

SBA Small Business Loan: Types

The most flexible and popular type of SBA loan program is 7(a). It can be used to cover the basic business requirements, such as machineries, equipment, land, furniture, construction and renovation. SBA also offers specialized loans for real estate, street improvements or landscaping. These types of loans are usually sponsored by a Certified Development Company (CDC) and a private lender.

Microloan program is a type of SBA loan program designed to help small businesses obtain short term loans of $35,000 or less. These loans are also offered to non-profit childcare centers. The money can be used to purchase supplies, machineries and inventory. These loans are offered as an effort of US SBA and non-profit community lending organizations. Some community lending organizations also offer technical training to applicants and train them on the best use of capital.

 

 

SBA Small Business Loan: Requirements

Applicants need to fulfill certain criteria to be eligible for SBA small business loans.

·        A company must fit the Small Business Administration’s definition of a small business. According to the SBA, a small business comprises around 500-1500 employees or around $5 million in gross profit, depending on the industry.

·        The company must be a for-profit organization

·        Applicants must run their businesses within the US or its possessions

·        The applicants should invest a reasonable amount of his own equity

·        Applicants should prove that they have reasonable degree of financial stability

·        Applicants cannot do illegal activities as part of the business

  • The applicant cannot involve in gambling or loan packaging. They cannot involve in investment or any money lending activities.

The personal history of the business owners are also examined by the SBA. The owners should submit a “statement of personal history,” and testify that they have a stable credit history and have abided by the laws of the land. The applicants cannot be on parole or a former felon.


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