Monday, July 23, 2012

SBA Loans

SBA is a federal body formed to facilitate small businesses loans. It is created considering the problems that SME owners have to face in starting or doing business in US. The agency mitigates the problems of entrepreneurs by financing their organizations through various fund pools that are pumped in to lenders’ account by launching new programs.

Definition of SBA
U.S. Small Business Administration is a Federal Agency. It is a facilitator for the growth and development of small business organizations. What the SBA does is it guarantees loans that are made to small businesses through lending institutions nationwide.
The SBA is not into making direct loans to business owners. It sets the guidelines and offers guarantee to financers to make up for their losses incase a borrower is found to default. SBA does not act as a direct provider of loan grants for small businesses. In-fact, it makes funds available to banks and other lenders by introducing several programs on a time to time basis. The agency also guarantees a percentage of the loans made by financers to small businesses. This minimizes lender’s risk and increases possibility for small businesses to find funds that they require.

Conditions for Securing SBA Loans
SBA loan is not available to businesses having substandard qualifications. They should have a good credit score and a sound business plan. The entrepreneurs should also be able to provide sufficient confidence to lenders that they are lending to viable business. They should meet the credit criteria set by lenders. The business owner who is willing to borrow loans should not have access to any other financing from any other source.

SBA Loan Advantages
Small business owners find it beneficial to use SBA loans. The loan term is for 25 years and the repayment is easy. Cash flow remains stable and business owners can use it to meet operational expenses. Debt repayment problems too wade off as an entrepreneur starts to make progress in business. With the borrowed money, entrepreneurs can meet operational expenses and worry less for debt repayment. It opens options like
  • $11.25 million loan for small business owners
  • Fixed rate as well as variable rate options
  • Loans up-to 90% for financing to businesses
  • Repayment term extends to 25 years thus making things convenient for the borrower
  • Absence of balloon payments
  • Small Businesses for profit are eligible
SBA loans are available to business owners in any for-profit industry. The amount that is granted can range from $25,000 to over $11.25 million. They are available for a variety of business purposes. It includes:
  • Loans for acquisition or expansion of business
  • Purchase of equipment, meeting working capital needs, and inventory needs
  • Construction or refurbishment needs
  • Investment for purchase of real estate property
  • Expansion or acquisition of another business
  • Refinancing debts
SBA is a competent authority that makes it possible for a lender to grant loans to small business organizations. The agency has played a tremendous role in making this happen after its inception. This lending agency grants loans to eligible businesses indirectly. But the guarantee that it offers to financers is trusted and so they are found willing to grant loans to business owners who are in need.

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