The SBA: Helping Hands for Small Businesses

The Small Business Administration, or SBA, aids small businesses in receiving loans by acting as a guarantor for lenders. With SBA backing, lenders are more likely to grant loans and to give favorable terms to the recipients. This system often enables businesses that would not receive a loan easily, to have greater success.

Getting Past the Lenders

The SBA will only consider backing a business that meets certain criteria. For most retail and wholesale trade industries, businesses that want to apply for SBA lending must be for profit, have 100 employees or fewer, under 5 million dollars in yearly revenue, and must allocate the funding for development or expansion purposes.

As a result of the increased stability of the loan, lenders will look at the business plan and business history more carefully than the collateral of the individual or business. Make sure to spruce up your business plan and be prepared to prove that your venture is a healthy prospect. You will also need to include a loan repayment plan, explanation of how you will use the funds, and what you expect those funds to provide for the business. Depending on the size of the loan and the nature of the business, the SBA will guarantee only a certain percentage of the loan. The SBA will not fund bail-out loans. SBAExpress loans require that the recipient pass the criteria for the 7(a)-type SBA loan.

Loans at the Speed of Necessity

The SBA developed an express lending service in 1995 called SBAExpress. The SBAExpress program was designed to help meet the needs of entrepreneurs for a rapid lending process. The loan process can enjoy a turnaround time of less than 36 hours. Part of the reason for the quickness of the lending process is that the SBA allows select, trusted lenders to use their own forms and procedures. Because of the speed of this process, the SBA will only guarantee a maximum of 50% of the loan. Also, the SBAExpress program will not fund more than 90% of any expenditure meant for a business loan. The monetary limit for SBAExpress backing is $350,000. For loans over $50,000, the interest rate is 4.5% above the prime rate, and or loans below $50,000, the interest rate is 6.5% above the prime rate.

An SBAExpress Loan in the Hand...

Franchises are a special case when it comes to lending. Not quite a start-up, but not quite an established business either, franchises can be complex to fund. There is however a special list of franchises that have been prequalified for SBAExpress funding. Getting the funds to start these franchises is markedly easier than with those that do not have the same approval. You can find out if your business qualifies for funding by contacting lending institutions. A loan officer’s career flourishes by helping business find the finances they need, so you should find them particularly useful. But remember that no one will simply throw you what you need. You must work to establish funding. A loan in the hand is worth two in the bush.