Understanding the SBA Loans is very important and it is the first step you need to make. This means understanding the process of getting a loan and understanding the role of SBA. SBA or the US Small Business Administration is a government agency which assists small businesses through its loan guaranty program. The SBA loan guaranty program offers financial guaranty to qualified small businesses which helps small businesses obtain financing from the private sector. Every year SBA guarantees billions of dollars and helps thousands of small businesses to obtain loans.
The SBA loan guaranty program is often misunderstood by small businesses. However, the private sector would not be able to satisfy the demand of small business lending without the help from SBA. SBA allows small businesses to apply for a guaranty for a portion of the small business loan. The application is approved based on a set of eligibility requirements. The funding is provided by the lender and the borrower deals directly with the lender. The borrower is not involved directly with SBA and the borrower might not be aware of SBA unless the loan is not paid back as agreed and in such a case SBA may be required to pay the guaranteed part of the loan.
The main SBA loan program is the SBA 7(a) Loan Program which provides financing for various small businesses and different purposes. This loan program is used by start up businesses as well as existing businesses. There are also additional SBA loan programs such as long-term fixed financing programs, micro loan programs for small businesses that require short-term financing for working capital and the disaster assistance loan programs that help small businesses repair or replace property, machinery and equipment. The SBA 7(a) Loan Program is the most flexible program and helps small businesses obtain financing when they are not able to obtain financing by using traditional lending programs. While SBA does not make loans it guarantees a portion of the loan made by commercial lenders. Loans provided by this SBA program are generally up to 10 years for working capital and 25 years for long-term or fixed assets. This program can be used by different small businesses for variety of purposes such as working capital, equipment, furniture, fixtures, machinery, etc. Most banks and many lenders participate in this SBA loan program. So the role of SBA is actually sharing the risk with the borrower - that's the way SBA helps small businesses.
Understanding the SBA Loans is very important and it is the first step you need to make. This means understanding the process of getting a loan and understanding the role of SBA. SBA or the US Small Business Administration is a government agency which assists small businesses through its loan guaranty program. The SBA loan guaranty program offers financial guaranty to qualified small businesses which helps small businesses obtain financing from the private sector. Every year SBA guarantees billions of dollars and helps thousands of small businesses to obtain loans.