I am also able to obtain loans through the Federal government's Small Business Administration (SBA loans).
There are essentially three different programs that the SBA oversees. I will discuss them below. The advantage of an SBA loan is that the interest rate is lower.
However, the approval time for SBA loans is very long, often taking several months. Another disadvantage is that the criteria for a SBA loan is very strict. About 90% of all applications for SBA loans are turned down. Among other qualifications, the applicant must have excellent credit. If you have the credit score and the patience, here are the SBA programs:
General Small Business Loans 7(a). These are loans to run your business. Under this program a bank generally provides all of the financing, while the SBA guarantees to reimburse to the lender a certain portion of the loan in the event the borrower defaults. There are many criteria that must be met in order to be eligible for this loan. Among the most significant are:
- The business must operate at a profit
- Be small (the definition of small varies from industry to industry)
- Be in the US
- The borrower must prove there are no other resources to obtain financing. This includes using the personal assets of the business owner.
how a need for the loan
- Use the funds for a sound business purpose
- currently not be in debt to the US government
Real Estate and Equipment Loans CDC/504. As the name implies, this program is used to purchase equipment or real estate for the business. It is run by a financing split between a bank and a Certified Development Company(CDC) which is regulated by the SBA. CDCs are nonprofits that raise their share of funds by buying government bonds. There are similar criteria as in 7(a) program.
Disaster Relief. This program is for businesses that have been damaged by some sort of disaster. The damage to the business can be physical damage or economic injury. Generally the interest rates are low the maximum loan amount is $2 million dollars. However, under certain circumstances, that limit can be raised.
Navigating the maze that is the SBA takes persistence and knowledge. The good news is that recently, the SBA has taken steps to streamline the application process. If you can wait for funding and have a good financial history, SBA loans may be the right choice. Go to my contact page or call me at 516-590-9803 to discuss what is the best option for you.