You have likely heard talk about SBA loans and what good they can do for small businesses. Between all of your many responsibilities, it can be challenging to get the facts together and see if a loan through the SBA is right for you. Here is a basic tutorial on SBA loans.

SBA Loan Defined

The Small Business Administration (SBA) exists to be a liaison between entrepreneurs and funding entities that can help small businesses plan, start, and expand. As the go-between, they don’t provide loans themselves but will guarantee a substantial portion of the loans of qualifying applicants. Since this lowers risk for the lending institution, loans at attractive rates are available to small companies who have trouble gaining financing through other means.

The requirements differ depending on the type of loan and the specific lender you use. The main expectations of the SBA are that you have a stake in a business that operates in the U.S., cannot get adequate financing through other means, and meet their current definitions of a small business. (Visit the SBA website for details.)

Loan Application Considerations

Since the SBA does not do the actual lending, you will likely have to find a lender who works with the SBA. This is a great benefit because you can compare lenders and determine the best partner for you and your firm.

Requirements for the loan may vary, but you will be expected to provide the same types of documents and verification as for any business loan. For example, personal and business financial statements and current balance sheets will give the SBA and the lender a good picture of your company’s stability. A business plan and cash flow projections for the coming year will demonstrate your insight and prove you can probably pay off the debt. 

As with all other lenders, they will look into your credit history and debt schedule to see how responsible you are with debt. The more prepared and detailed you can be with the financials, the greater your chances of approval.

Types of SBA Loans

There are many types of loans to meet different needs. There is not enough space here to go into much detail, but research and find the eligibility requirements for these loan types:

• SBA Disaster Loan
• Community Advantage SBA Loan
• SBA CAPLines
• SBA 7(a) Loan (also offered as an SBA 7(a) Express Loan)
• SBA CDC 504 Loan
• SBA Microloan 

If you are eligible for an SBA loan, seriously consider taking advantage of the opportunity. It is a fantastic way for small businesses to gain an edge in the competitive market.