For any individual, taking a loan involves great research and planning. The aspect of finance and mortgage is full of complexities and intricate terminology that can confuse an ordinary individual. The rules and terms further change when small business units or entrepreneurs apply for loans. This is where the SBA or Small Business Administration steps in. The SBA plays a major role in helping business firms in acquiring easy loans at favorable terms.

Learn about SBA :

Small Business Administration or SBA as it is popularly known is a branch of the United States government. It was established in the year 1953. The SBA is headed by a Director who is appointed by the President of the US. The SBA can be termed as the agency of the government that helps small and upcoming business units and entrepreneurs in several ways. It helps them in procurement initiatives, provides accurate business information and contract details and also provides management and financial assistance to the small units. The most crucial help that SBA provides to the small business firms is in the procurement of loans. The SBA provides the loans to the units through various financial institutions. The business units can use these loans for several purposes like capital formation, for buying machinery, for buying real estate and for further expansion programs.

How does SBA really help

Almost all small business units in the US have to approach the SBA in the due course of time for seeking different kinds of assistance. The SBA provides perfect guidance and counseling to the innumerable nascent firms that are trying to make a mark in the corporate world. The SBA formulates a large number of plans that focus on loan assistance and extensive credit provisions. The SBA helps the units in securing short-term, medium-term and long-term loans according to the status and credentials of the company. There are programs like the Microbusiness Intermediary Loan Program, the SBA Guarantee Program and the most recent loan program being the program of revolving line of credit. The role of SBA extends greatly and its contribution in making loans available for all the smaller units is almost inevitable.

Loan Assistance :

The SBA has an excellent and elaborate loan program that covers all the aspects involved in the process of lending. SBA formulates the rules, regulations and terms of the loans that can be given to the small business units. However, the SBA does not actually give the amount itself. Different resources like lenders, community development organizations and microlending institutions give the loan amount. These can be termed as partners of SBA that give loans on the SBAs behalf. T

These loans are fully backed by the SBA through a guarantee policy, which makes it safe for the lenders to give the loan amount. This implies that the SBA loans are as same as the conventional commercial loans but only have SBA guarantee and are based on SBA terms and conditions.

The terms, conditions and interest rates charged for the SBA loans vary according to the economic conditions of the country. These terms and interest rates are fixed on the basis of the fiscal policy formulated by the financial ministry of the country. This policy would be made keeping in mind the benefit of the country.

Who can get a SBA Loan

It is important that the business units satisfy certain criteria before they can be eligible for a SBA loan. The important criteria are as follows:

1) The entrepreneur will have to submit all the documents that describe the precise profile of his business. He must provide authentic records of the exact duration of the unit, the number of employees working in the unit, annual sales, gross and net revenue of the unit.

2) The most important criterion is the way in which the entrepreneur plans to use the loan in his business endeavor. Accordingly, he must submit the loan application along with the exact amount of the loan.

3) The entrepreneur must also submit complete and authenticated financial statements of the company for the past three years along with the present interim financial statement.

4) The entrepreneur must also provide financial details of himself and of his other partners, if any as well as those of the stock holders who hold about 20% or more stake in the company.

5) The entrepreneur and his partners must have a good credit record in order to secure a SBA loan. Hence, to prove their credibility they must submit their credit report that proves that they have good credit.

SBA Loan Types:

The SBA offers various types of loans to the small business units and entrepreneurs. However, the most commonly used SBA loan is the 7(a) loan. The 7(a) loan is named after the section 7(a) of the Small Business Act. This act gives the authority to the agency to give loans to the small business units in the country.

The lenders who provide the 7(a) loans are known as participants. Though it is not necessary that all lenders are participants, most of them do take on the mantle. Some of the basic features of the 7(a) loans are as follows:

a) The loans are provided only after it is completely guaranteed. The SBA does not give full guarantee of the loan and only gives a partial guarantee. This implies that the SBA and the lenders share the risk of lending equally.

b) The 7(a) loan is given actually by a commercial establishment and not by any branch of the government. Thus, the lender can decide whether to lend the loan or not irrespective of the guarantee from the SBA.

c) Hence, the borrower must prove himself credit worthy to the SBA as well as to the lender.

Disaster Loans :

The SBA also provides loans to business units to counter any disaster. This means that if the business units suffer destruction from any natural calamities like hurricanes, earthquakes, flooding and cyclones, then these disaster loans can help them in resurrection.

Micro Loans :

The micro loans are those loans that the SBA provides to those entrepreneurs who have recently embarked on their business. These newly set-up firms can get a loan of a maximum of $35,000 for further investment. Usually, borrowers take a loan of about $13,000 for business expansion.

All these different loans programs and facilities make the SBA the best partner for all the small business units in the US. The comprehensive coverage offered by the SBA makes it an all-important authority with respect to commercial guidance, planning and assistance.