The Small Business Owner’s Guide to SBA Loans

If you are running a small company, you know how difficult it can be to access the credit tools you need. Small companies are disadvantaged by the risk equations banks and other traditional lending institutions use when determining whether they can extend SBA loans, a fact which leads many companies to be rejected when the loan would be appropriate. The Small Business Administration helps by guaranteeing all or part of those loans, making it possible for small companies and traditional lenders to work together to strengthen the economies of individual communities around the country.


The first thing to understand about these loans is that they are designed for entrepreneurs making a long-term investment in a company. They can be used to acquire existing businesses as long as they have a qualifying income of $1.25 million per year or less and healthy financials. They can also be used to purchase facilities or equipment if you already own a business. In each case, there may be restrictions on early repayment, because the SBA wants to be sure business owners are investing in the stability and growth of their companies.


When getting ready to apply for SBA loans, you should understand the difference between preferred providers and regular providers, too. Preferred providers of these loans have been vetted by the SBA to make determinations autonomously. This means they don’t have to wait for the SBA to review your loan package and make a separate approval after they have decided to go ahead with the loan, so they can make determinations faster. It also means you can apply at multiple preferred providers at once, as opposed to the regular providers, which do not process simultaneous submissions under most circumstances because they have to send them out to the SBA.


There’s also the SBA express program to keep in mind, which allows companies with financing needs up to $350,000 to access funds without collateral. It’s relatively new, and it’s and extension of the existing 7(a) program for equipment and facilities. Overall, the Small Business Administration works hard to ensure that SBA loans are accessible and flexible for small business owners. The key point to keep in mind is that the loans are designed for long-term investments and not short-term working capital. If that’s what you need, then another instrument is probably going to serve you better. For those long-term investments, though, you’ll have a hard time finding friendlier financing than these loans.

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