An SBA Loan - What Is It & Will It Benefit You?

An SBA Loan - What Is It & Will It Benefit You

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Small businesses that cannot secure a loan through conventional means can apply for one of the SBA loans in order to obtain funds. However, they must first attempt to obtain a loan through a commercial lender, private source, or bank. Once the business is turned down for the loan, the owner may then apply for an SBA loan provided his business meets the SBA requirements including its definition of a small business.

The business must be owned and operated independently in order to qualify for one of the SBA loans. Additionally, it must meet the predetermined specifications for size as far as the number of employees and revenue. Also, it cannot be a major company in its field. If approved for the SBA loan, the owner of the business is expected to comply with SBA regulations regarding matters of discrimination and public services.

The SBA loan is acquired through the private sector, but the SBA (Small Business Association), a governmental agency, guarantees the loan. The business owner must pledge to repay the loan in its entirety before the SBA grants him approval for the loan.

Several SBA loan programs are available. It is up to the borrower along with guidance from the lender to determine which one of the SBA loans is best suited for his needs. The interest rates, typically lower than those offered from the private sector, vary across the different types of SBA loans.

When completing your application for an SBA loan, it is necessary to bring the following documentation with you:

A Business Plan- this details the type of business venture that you have and how long it has been in existence, along with the number of employees, actual or projected earnings, and ownership structure. This should include copies of business lease and business certificate.

A Loan Request- this details the manner in which the proceeds from the loan will be spent.

Personal Financial Statements- the personal financial statements, including signed copies of federal income taxes for previous three years of anyone who owns a minimum of 20 percent of the business must be provided. This includes owners, partners, stockholders, and officers.

Business Financial Statements- the complete financial statements for the business for the last three years must be provided including current business balance sheet, information on subsidiaries, projected outlook for income and finances of the business, and signed copies of federal income taxes for previous three years.

Intended Collateral- this details the specifics of the property being offered as collateral for the SBA loan.

Personnel Resumes- the resumes, including personal financial statement and history, of each major participant in a high-ranking, managerial position might be requested.

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