Details on a SBA Loan.
A small business loan is money borrowed by the business owner to start or run a small business. The Small Business Administration is a part of the United States Department of Commerce. They help small business owners finance through their SBA loans. The Small Business Administration can guarantee loans to qualifying businesses that are unable to get a loan through their own bank. An SBA Loan makes financing possible to small businesses that normally would not qualify for a loan.
There are some items you will need to get in order before applying for an SBA Loan. First you need to have a profile of your business. You will need to be able to show how the funds will be used if you are approved. Do you have anything you can use as collateral if necessary? You will need your business financial statements as well as your personal financial statements.
After you have all your information together for your loan you will need to figure what type of SBA Loan will best fit your needs. There are several types of SBA Loan programs. The Basic 7(a) guaranty this is the Small Business Administration’s most flexible plan. The loan can be used for furniture, land, equipment, machinery and several other items. This SBA loan is easy to qualify for.
The 504 Certified Development Company. This SBA Loan is used to acquire real estate or machinery. The SBA loan amount for the 504 is up to one million dollars.
SBA Microloans
The SBA Microloans are short term loans of up to thirty five thousand dollars. This SBA Loan is for non profit child care centers and small businesses that need a little help starting up or expanding. They tend to have higher interest rates on them. Those are just a few of the loans the Small Business Administration has for you.
A Small Business Administration Loan can help your small business build the credit it needs.
Are you looking for a SBA Loan
The article below gives steps to help determine if a SBA loan is right for you.
Is A SBA Loan Right For You?
Are you in the process of starting a small business? Are you in search of a lender who has the knowledge to help you obtain the type of loan that’s right for you? If so, consider applying for a SBA loan, today.
The Small Business Administration (SBA) has been helping small business owners with funding requests since 1953. This independent government agency offers three types of loans, and is responsible for creating and maintaining guidelines for each.
The actual funds come from a variety of lenders who have agreed to follow SBA guidelines when providing business loans. In return, the same lenders receive a government guarantee that these debts will be repaid, in a timely manner.
The most common SBA loan program is the Basic 7(a) Loan Guaranty. There are numerous variations of this loan, created to serve a wider range of small business applicants. This type of loan is available to both new businesses and those already in existence. It is the easiest to obtain, due to very flexible terms. It is considered a commercial loan.
This SBA program has assisted thousands of small business owners obtain loans, even after being turned down by other banks and lending institutions. Borrowed monies from the Basic 7(a) Loan can be used for many things such as land, buildings, equipment, improvements, furniture, working capital and
more.
Small businesses must meet certain requirements in order to be approved for a SBA loan, of any kind. Lenders only show interest in those businesses meeting specific criteria. Factors include business size, business type, the ability to obtain funding from additional sources, the means to repay loan and the fact that the business is a “for profit” business.
There are fees and prepayment penalties associated with SBA loans. As a rule, they are somewhat lower than traditional loans.
What to expect when you are applying for a business loan.
Business loan: the questions they ask you.
So you have finally made up your mind and you are applying for a business loan? Bear in mind that, when applying for a business loan, the selected lender will want to know all about you, your company and your employees. They will even want to know about how well you know your competitors. The finality of all this questioning is to make sure that the business loan they are giving you is a secure investment for them. They want to make sure your business will thrive and you will be able to pay them back every cent.
A business loan is a serious contract between you and the lender, and they want to make sure you will meet every part of that contract. The first question they will want you to answer is exactly that: will you be able to repay that business loan? And if the business turns out to be a failure, will you or the business owner still be able to keep your word and your legal bindings? Have you arranged the proper security conditions to make sure that you will be able to repay your business loan no matter what happens?
Those may seem rough questions but you will be asked all that and you will need to know exactly how to answer if you are to get that business loan you need so much. And no, that is not all. There are a lot more questions you will need to answer. Questions like your company’s financial history. Your lender will want to know if you pay your employees salaries on time, if you owe any money to anyone, if your company pays its bills and has full control on its inventory and financial operations. They will also want to know what kind of profit your company makes. Are you in profit since day one? How much time did it take for your company to start showing some profit?
If you are requesting a business loan for a new company, you will want to hire someone to make you a profit projection. If your company sells a product, your lender will want to know if your product is selling and how does your profit line look like. Is that line moving up or is it going down?
Speaking of projections, when applying for a business loan you will have to prepare yourself to talk not only about the past of your company, but also about its probable future. How do you think your company’s future will be like?
How well do you know your competitors? Knowing your competitors is a key factor to your success but it is also a key factor for getting your business loan. Those a few other questions you will be asked when applying for a business loan: what are your competitor’s strengths and weaknesses? Are you aware of them and do you know how to compete with them?
You will likely need to answer more questions than the above mentioned but that should give you a good idea of how well prepared you need to be if you want to succeed in getting your business loan. The key is to be organized.
Starting a Business? Get the Facts on a Business Loan
Are you interested in starting your own business? If you are, you may need to get a loan to help you pay for any real estate, rent, and other necessary items for you to initially run your business. What you may not realize is that the kind of loan you choose could be the difference between success and failure, regardless of how successful your business becomes.
For example, if you choose a conventional bank loan, the bank amortizes the loan over a 15 to 20 year span. The bank will also call the loan up for review every three to five years. The review provides the most risk to the business owner. With the review, the bank can decide that they no longer wish to have loans to the kind of business that you have, and call in the remainder of the debt. Having to quickly find the money to pay the remainder of your loan can easily bankrupt your business, even if you are highly successful. It may not sound fair, but it is in the fine print of the loan agreement- read the information carefully before you sign.
The bank can also decide to re-amortize the loan over another 15 to 20 year time frame, which means you essentially lose the years of interest you have paid down, and you will start over, with more interest for you to pay. You will also have to pay thousands of dollars to reapply for the loan when your loan is under review. Keep in mind that the review process happens every three to five years, and the renewal application fees apply for each one. This can add up to several thousand dollars just to keep your loan, with no real benefit to you or your business.
A better choice than a conventional bank loan is a SBA loan, which is fully amortized. The business owner does not have to worry about the bank calling in for payment before the loan is due, and it cannot be re-amortize. There are also no reviews, therefore any fees to pay other than the debt of the loan. You can get a SBA loan for anywhere from 7 to 25 years, depending on the need and the purpose of the loan.
With an SBA loan, you save thousands in interest and renewal fees. Most importantly, you can enjoy the success of your new business without worrying about losing your loan in a review. Be sure to ask your provider about an SBA loan, and you’ll be making a wise choice for you and your business.