1. How do I apply for a SBA Loan Guarantee?
SBA has three different loan programs. Each of the
programs is designed to cover a variety of business,
needs, thus providing the most options to small
businesses. As the programs are delivered by SBA’s partners and are
not direct loans from SBA, businesses should consult
their District offices or contact the lending partners in
their area before filling out any applications. Contact a
local lender and discuss your loan proposal with one of
their loan officers. Be prepared to discuss your proposal
in detail with the lender. You should have the following
available for the lenders review: your business plan;
your personal financial statements; your business
financial statements (if already a business); collateral
available to secure the loan; assumptions used in your
projected earnings statements; management resumes of
those involved in operating the business; and pro-forma
balance sheets showing what the business would look like
if the loan were granted. Be prepared to discuss your
proposal in detail with the lender.
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2. What do I need to qualify for a SBA Loan?
In order to get a 7(a) loan, the applicant must first
be eligible. Repayment ability from the cash flow of the
business is a primary consideration in the SBA loan
decision process but good character, management
capability, collateral, and owner's equity contribution
are also important considerations. All owners of 20
percent or more are required to personally guarantee SBA
loans.
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3. What type of collateral do I need for a loan?
Repayment ability from the cash flow of the business
is a primary consideration in the SBA loan decision
process but good character, management capability,
collateral and owner’s equity contribution are also
important considerations. All owners of twenty percent
(20%) or more of the business are required to personally
guarantee the SBA loan. The SBA does not deny approval
for a SBA guaranty loan solely due to lack of collateral;
however, it can be used as a reason, in addition to other
credit factors.
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4. How does the SBA guarantee loan program work?
Under the guaranty concept, commercial lenders make
and administer the loans. The business applies to a
lender for their financing. The lender decides if they
will make the loan internally or if the application has
some weaknesses which, in their opinion, will require an
SBA guaranty if the loan is to be made. The guaranty
which SBA provides is only available to the lender. It
assures the lender that in the event the borrower does
not repay their obligation and a payment default occurs,
the Government will reimburse the lender for its loss, up
to the percentage of SBA's guaranty. Under this program,
the borrower remains obligated for the full amount due.
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5. Where do I obtain an application for a SBA
loan?
Applications have been provided by SBA to all lenders
that actively participate with us. Applications can be
obtained from the lender you will be working with, or at
your local SBA Office. Many forms are also available
online at www.sba.gov/library/forms. However, since there
are several variations of SBA’s loan programs, a
business should always check with the lender or SBA
District Office before filling out an application.
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6. What is the interest rate on SBA loans?
SBA does not set the interest rate on the loans, only
the maximum rate the bank may charge. The actual rate is
negotiated between the lender and the borrower.
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7. How do I get a small business grant
At this time, Congress has not set aside any monies
for grants to start and/or expand a small business. The
U.S. Government does have grants that meet other purposes
not related to business needs. The following website
contains some of those resources:
http://www.sba.gov/financing/basics/grants.html
SBA does however provide a loan guaranty program for
loans made by your local lender. The SBA guarantees loans
that the lender could not normally approve.
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8. How long do I have to repay a SBA loan?
The repayment term is generally between five and
twenty-five years depending on the life of the assets
being financed and the cash needs of the business.
Working capital loans (inventory and accounts receivable)
should be repaid in five to ten years. The SBA also has
short-term loan guarantee programs. Ask your lender or
call your local SBA office.
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9. What if the lender declines me for a SBA
Guaranteed loan?
SBA no longer has direct funds to lend and cannot
provide financial assistance without a participating
lender. Ask the lender what can be done to improve your
business plan and application. Correct the business plan
and resubmit it to the lender. If that lender is
unwilling to approve the loan or submit the application
to SBA, try another lender. The Small Business
Development Centers (SBDC) and the Service Corp of
Retired Executives (SCORE) can provide assistance. SCORE
and SBDC are partly funded by SBA and one-on-one
counseling is available.
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10. What types of Businesses are Eligible for SBA
Loan Programs?
The vast majority of businesses are eligible for
financial assistance from the SBA. However, applicant
businesses must operate for profit; be engaged in, or
propose to do business in, the United States or its
possessions; have reasonable owner equity to invest; and,
use alternative financial resources first including
personal assets. It should be noted that some businesses
are ineligible for financial assistance.
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