Small Business Association Loans

By: EconomyWatch Content   Date: 30 November 2009

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If you want to inject cash into your business, you can begin by gathering information about Small Business Administration (SBA) loans. The SBA was created in 1953 by the US Congress to help millions of Americans hone their entrepreneurial skills and start their own ventures. The SBA has offices across the US and has very flexible guidelines for giving out loans to potential business owners.

Small Business Association Loans: Requirements

You can secure an SBA loan to either create a new business or upgrade your existing business. Regardless of the usage, you should create a proper statement of purpose and present it to the SBA executives. Most SBA loans require you to retain 10%-20% of the equity in the business. Some SBA loans require you to pledge your personal assets and insurance as collaterals.

SBA loans are not for you if you have a poor credit record. These loans require you to have a valid business plan and some amount of capital.

Small Business Association Loans: How to obtain an SBA loan

In order to secure an SBA loan, you have to prove to the SBA executives that you’ve been turned down by at least two different banks. In other words, rejection from a private source is a primary prerequisite to get the loan. When you are rejected by a bank, you can ask the executives to coordinate with the SBA. This way you can receive the loan under SBA’s loan guarantee plan. Most SBA loans are obtained by dealing with the SBA directly, without the involvement of bank executives.

You can then fill out the required SBA loan application forms and provide your personal history statement and monthly cash flow projections. Make sure your paperwork is complete and in order. The SBA then checks your repayment ability and history of default and bankruptcy.

Small Business Association Loans: Types

·        SBA loans for start-ups with a maximum length of repayment of seven to ten years.

·        SBA loans for existing businesses.

·        SBA loans for real estate with a maximum loan amount of up to $2 million. The SBA requires as little as a 10% down payment on a commercial real estate loan and imposes a three-year prepayment penalty.

·        SBA loans for business acquisition where the maximum length of repayment is ten years. The SBA will require you to make a cash injection of between 25% and 33% of the total business plan.


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