Why Should A Small Business Owner Consider An SBA Loan?

The Small Business Administration more commonly known as the SBA is a Federal Government Agency established to protect and assist America's greatest resource... small business. The agency was created by Congress in 1953, to help capitalize small businesses who could not find reasonable financing. Today, SBA loans are the primary source of capital injected into the small business community nationwide. Last year the SBA assisted small business with over Ten Billion Dollars of loan guarantees.

SBA's mission is to stimulate and foster economic development through small business, because helping small businesses get started and become successful is good for the nation's economy. Briefly, the SBA loan guarantee program works in the following manner. The SBA will guarantee a portion of a business loan made by an sba lender enrolled in the program. By issuing a partial Federal Guarantee to the lender, your loan which might not be approved on conventional terms, can now be approved via a SBA guaranteed loan. Obtaining capital is the single most difficult hurdle a small business experiences. Giving small business access to capital is the main goal of the SBA. Many small business owners find cash flow to be a major concern. For them an SBA guaranteed loan may be the only answer and possibly the best way of obtaining long term financing. Long term loans can be made for almost any business purpose to qualified applicants. SBA guaranteed loan terms typically range from 7 to 25 years depending on the purpose of the loan, in addition the loan is fully amortized.

IS YOUR SMALL BUSINESS ELIGIBLE FOR A SBA LOAN?

SBA guaranteed loans are available to small businesses who are unable to borrow on reasonable terms and conditions from other sources. Your small business is probably eligible for one or more of the business loan programs the SBA offers.

To be eligible for an SBA loan, your small business must fall within a size standard set by the agency. This size standard is based on the annual receipts (generally under $10 million annually) or the number of employees (generally under 500), or depending on the type of industry and SBA program the company is applying for.

In addition the company should be independently owned and operated for profit and not be dominate in its field. Loans cannot be made to speculative businesses or businesses engaged in gambling or pornography.

Management must be experienced and of good character with a cash flow profit history that indicates an ability to service the proposed debt. The ratio of equity to debt must be reasonable for the industry and adequate collateral must also be available to support the loan. Good credit is a major factor in determining eligibility.

Loans are also available to persons who wish to start a business. Most of the conditions and terms mentioned above are also applicable for a start-up. A well thought out business plan and a capital contribution from the applicant will also be part of the requirements of a start up loan. SBA loans are probably the best type of financing a start up business can find in today's market.

Please click on FAQ for a list of the most frequently asked questions and answers.

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