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Can I borrow money from the SBA?
Actually, no!
This is a common misconception.
The SBA will guarantee the loan that some other lender makes for you, but it does not do the actual loaning.
The SBA is not a direct lender – it is a guarantor!
However, the paper work flows through the SBA for approval.
Here’s how the flow works:
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The entrepreneur applies to a lender for financing
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The lender decides if it will make the loan internally, or if the application has some weaknesses which, in their opinion, will require an SBA guarantee
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The proper forms are submitted to the SBA
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If the SBA agrees to guarantee the loan, the lender loans the money to the business
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The entrepreneur makes his loan payments directly to the bank or lender
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If the entrepreneur fails to make his payments and repay the loan, the government will reimburse the lender for its loss, up to the percentage of the SBA’s guarantee
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The entrepreneur remains obligated for the full amount due, only now the money is due to the government
What does the SBA look for in an entrepreneur before it will guarantee the loan?
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A Credit Report Score over 580
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Proof that the loan can be repaid from the profits of the business
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Good character
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Management capability
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Collateral for the loan
The SBA does not necessarily deny approval due to lack of collateral; however, it can be combined with other factors as a reason for denial
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Owner’s equity contribution
All owners of twenty percent (20%) or more of the business are required to personally guarantee the SBA loan.
Which types of businesses are eligible for SBA guarantee programs?
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Manufacturing
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Wholesale
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Retail
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Construction
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Services
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Special Trade
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Agriculture
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Mining
Of course, within each category there are many other considerations, such as number of employees or maximum annual revenue.
What type of programs does the SBA offer to entrepreneurs and small business owners?
A large variety of programs are offered, each fulfilling a different need. Here’s a few of them.
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The Basic 7(a) Loan Guaranty
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This is the primary business loan program for small businesses
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The 504 Loan Program – Certified Development Company (CDC)
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The 7(m) Microloan Program
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Loan Prequalification Program
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Low Documentation Loan
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CAPLines
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8(a) Business Development Program
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The Small Disadvantaged Business (SDB) Certification Program
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Export Working Capital Program (EWCP)
A more detailed explanation of all the SBA loans is provided in the book, The Entrepreneur’s Guide to Prosperity -- Financing Your Small Business, by Morris Bocian.
If you think an SBA Loan can enhance your Cash Flow, or if you feel there are other ways an SBA Loan would benefit your business, e-mail us at
CashFlow@NowFinancing.com.
And, of course, No Obligation! We truly would like to answer any questions you might have about Factoring.
A more detailed explanation of
Factoring is provided in the book,
The Entrepreneur’s Guide to Prosperity -- Financing Your Small Business, by Morris
Bocian. |
