Finding financing presents a challenging obstacle to overcome when starting a business. The Small Business Administration (SBA) offers financing assistance for starting a business when owners experience difficulties qualifying for a traditional bank loan. SBA 7a loans provide qualified borrowers in the start-up phase with basic, secured loans to start a small business. While the SBA does not provide direct small business loans, it guarantees them, providing borrowers the ability to begin the process with a local lender working within SBA guidelines.
The flexibility of SBA 7a loans affords suitable applicants with a wide range of purposes for a loan, including fixed assets, working capital, building, land and debt refinancing. In addition, loan maturity varies, with a typical term for working capital of 10 years, and up to 25 years for fixed assets. Whereas the majority of American banks partner in the program, so do several non-bank lenders, increasing the availability of SBA loans. Each SBA lender has to adhere to the standard operating procedure manual or (SOP) which outlines the rules and regulations each lender has to abide by. However each lender can create their “own” general underwriting parameters to differentiate themselves from other SBA lenders looking to offer small business loans.
Further eligibility requirements include operating for profit and being small as defined by the SBA. In addition, the business must be involved in or intend to perform a trade within the United States. Of course, small business loan borrowers must not be negligent on any current liabilities or commitments to the U.S. government and provide evidence showing the sound business purpose use of the funding.
When a business applies for an SBA guaranteed loan, it is seeking a commercial loan, precisely organized in concurrence with SBA terms and conditions. What is more, partners such as banking institutions, community development organizations and micro-lending administrations adhere to the strict protocols set for funding SBA loans. For this reason, cooperating granters consent to structure SBA loans in compliance with SBA guidelines. Under the SBA 7a Loan program, the SBA provides a 75% guarantee to lender that participates. It acts like an insurance policy for the participating lender and provides an incentive for participating lenders to fund small business loans.
The SBA cooperates with a large number of economic associates to advise, coach and provide guidance to small business owners in the early developmental phases. In addition, it offers regionally and local support at small business development centers, field offices and Veteran’s business outreach centers. SBA 7a loans provide an excellent resource for help in starting and growing a profitable small business.
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