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Small Business Administration
The U.S. Small Business Administration (SBA), an agency of the Federal Government, provides loan guarantees to banks and other lenders. These guarantees reduce the amount of risk to the lender and thereby increase the amount of money available to small businesses. The SBA offers these loans because it recognizes the importance of our nation’s small businesses in society. SBA loans offer competitive rates and longer terms, no points, no balloon payments, and no pre-payment penalties. Many business owners find cash flow to be a major concern. For them an SBA guaranteed loan may be the answer and possibly the best way of obtaining long term financing, and is the most popular, common loan program for start-up franchises.
All owners of 20% or more of the business must take full financial responsibility for the loan. In some instances, personal assets of the owners must be used to secure the loan. A lack of collateral does not drive the approval process, but does add to the promptness of underwriting turn around. When applying for an SBA loan, applicants will spend most of their time preparing historical and current financial statements. Lenders require an accurate representation of your business' income and expenses so they can determine whether they should undertake the risk of lending your business capital. It is therefore necessary to update company balance sheets, profit and loss or income statements, and provide a cash flow statement. New businesses are required to provide a forecast of expected revenue and liabilities. Below is the list of ineligible loan purposes and applicants. If any of the following apply to you, the SBA will not be able to help.
- If other funds are available to you
- If the funds are going to be used to pay off creditors who are in a position to take a loss (you're debts are in arrears)
- Business promoting a particular religion or philosophy
- Funds used to cover owner withdrawals or to pay off blood relatives
- Funds used for investment--real estate or other
- Funds used for speculation
- Non-profit organizations
- Income is derived from gambling or any illegal activity
- Funds used for lending
- Funds to be used for floor plan financing
- Multi-level marketing sales plans
- Those on probation or parole and/or pending criminal charges
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