SBA Loan

Helping small businesses find funding

By Tia Barber

If you have a small business or are just starting up, then you've probably searched the Web for one thing: money. Funding, and where to get it, is a major topic among business owners, and one of the strongest sources is an SBA (Small Business Administration) loan. The SBA was created to help Americans start, build and grow businesses. The Government loves small businesses, and accordingly they've set aside vast resources dedicated solely to further the efforts of you, the entrepreneur. It's important to note, however, that an SBA business loan is actually a loan obtained through private or other institutions and that the SBA merely backs those loans as a guarantor.

There are four loan programs within the SBA, but most American banks or lenders (called Participants in the SBA) provide loans through the Basic 7(a) Loan Program. Their eligibility requirements are broad, helping to ensure that many diverse financing needs are met.

Eligibility Factors for all 7(a) loans include:

  • Size of the business
  • Use of proceeds
  • Lack of internal funding sources
  • Demonstrated repayment ability

Why do lenders go for this? It's simple. When the SBA guarantees a loan to the bank, they are transferring the risk of non-payment from the lender to the SBA. This means that when you apply for an SBA Loan, you are actually applying for a commercial loan (often referred to as an SBA commercial loan), which is set up according to SBA requirements, which the SBA guarantees.

Some of you may be wondering how to apply for an SBA business loan. Well, there is not an official SBA loan application, rather you pick a lender you feel comfortable with and submit a commercial loan application through them. If you want, you can mention your interest in SBA backing. The lender then decides if they need the SBA to guarantee the loan, or if they'll make the loan in house.

So you've got your funding set up, but how do you take your business further? The SBA business plan section can certainly help. They have courses you can take to help you understand the how's and why's of business planning, as well as samples for you to view and questionnaire's aimed at ensuring entrepreneur readiness.

They also have an entire section devoted to helping you create a business plan, finding mentors in your field, buying franchises, managing your business, and even a section on proper exit strategies if it's time to quit the game.

Making use of everything the SBA has to offer is a sure-fire way to ensure you are knowledgeable, prepared and properly funded!