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SBA Loan

Introduction to SBA loans:

The full form of SBA loan is Small Business Administration. It is the U.S. independent Agency of the Executive Branch of the Federal Government. It is responsible of providing four primary areas of assistance to American Small Business. They are: Advocacy, Management, Procurement, and Financial Assistance. Financial Assistance is provided primarily through SBAs Investment programs, Business Loan Programs, Disaster Loan Programs, and Bonding for Contractors.

One more thing about SBA loan is that this loan offer lower down payments and longer repayment terms than many other financing options. They are smart, affordable solutions for small businesses looking to grow their business.

Types Of SBA Loans

1. SBA 7(a) loan:

Thiis loan can be used for nearly any business purpose, such as commercial real estate, construction or renovation for owner-users, business acquisition and start-up, franchise refinancing, refinancing for existing debt, equipment purchases, working capital, and inventory.

2.SBA 7(a) Benefits:

The benefits are as follows:

Can be used for nearly any business expense

Down payments as low as 10%

Loan amounts from $250,000 to $2 million

Competitive rates

Low monthly payments with up to 25-year amortizations available

Quick approvals and fast closings

Owner-occupancy as low as 51%

3.SBA 504 Loans:

If you have big plans with your small business then this loan is perfect for you . It gives out large loan amount in low monthly payments. the SBA 504 Loan Program is ideal for bigger real estate purchases or construction projects.

4.SBA 504 Benefits:

The benefits are as follows :

Combined loan amounts up to $6.5 million

Down payments as low as 10%

Competitive rates

Low monthly payments with up to 30-year amortizations available

Commercial occupancy as low as 51%

Following things are necessary to qualify for SBA Loans:

1. You must have a stake in the business. The theory is if you have put your own money into your venture, then you are much more likely to push harder for the success of your business.

2. You should have a strong business plan showing the detailed plans on how your business can make money. How will you be able to repay the loan and does your business earn enough to cover the monthly payments.

3. You need a good personal credit rating. The borrower's track record in paying their bills will form an important component in the loan application process.

Some points to get the SBA loans:

1. As the Government is involved in it , it will take some time to get the loan.

2. Your Spouse may also have to sign on to the loan .

3. SBA guaranteed loan may have a higher interest rate than a conventional loan.

4. There is no special treatment for minorities in getting the loan.

5. 5. You will not get all amount at the sametime .

SBA Programs:

SBA administers three separate, but equally important loan programs . They are SBA Business Loan Programs ,SBA Investment Programs and SBA Bonding Programs .

SBA Business Loan Programs

In this program SBA sets the guidelines for the loans while SBAs partners such as Lenders, Community Development Organizations , and Micro Lending Institutions make the loans to small businesses . SBA backs those loans with a guaranty , so there is a less risk factor for the lenders. But the

Agencys loan guarantee can change according to the Governments fiscal policy and also according to the economic conditions .Federal appropriations are available to the SBA to provide guarantees on loans structured under the Agency's requirements. With a loan guaranty, the actual funds are provided by independent lenders who receive the full faith and credit backing of the Federal Government on a portion of the loan they make to small business. The loan guaranty which SBA provides transfers the risk of borrower non-payment, up to the amount of the guaranty, from the lender to SBA. Therefore, when a business applies for an SBA Loan, they are actually applying for a commercial loan, structured according to SBA requirements, which receives an SBA guaranty. community development organizations can get the Government's full backing on their loan .

SBAs Investment Programs:

The Small Business Investment Company program was created by the Congress in 1958. They are privately owned and managed investment firms and are licensed by the Small Business Administration. They are participants in a vital partnership between government and the private sector economy. With their own capital and with funds borrowed at favorable rates through the Federal Government they provide venture capital to small independent businesses, both new and already established. All SBICs are profit-oriented businesses.

SBAs Bonding Programs:

SBAs bonding program was developed to provide small and minority contractors with contracting opportunities for which they would not otherwise bid. The (SBA) can guarantee bonds for contracts up to $2 million, covering bid, performance and payment bonds for small and emerging contractors who cannot obtain surety bonds through regular commercial channels. SBA's guarantee gives sureties to eligible contractors and thereby strengthens a contractor's ability to obtain bonding and greater access to contracting opportunities. A surety guarantee, an agreement between a surety and the SBA, provides that SBA will assume a predetermined percentage of loss in the event the contractor should breach the terms of the contract

SBA loans for women:

SBA loans are available comparatively in a easier way to women. Small Business Administration Loans for women are applied for just as with a regular small business loan, namely, through a commercial bank, or another local, regional, or national bank.


Thus it is seen that SBA loans offer a wide variety of loan guarantee programs to fund small businesses that can't otherwise qualify for loans on reasonable terms. Commercial lenders make the loans and the SBA guarantees them because the SBA has no funds for direct lending or grants. SBA loan is most suitable for women also. Many women who want to start their small business and have been turned other loan lending institutions can knock the doors of SBA.

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