SBA LOANS Guide: How to Apply, Eligibility (+ Free easy tips)

SBA loans

Funding your business through the SBA loans can get easy when you know the basic facts about them as discussed in this post. This will include getting in-depth knowledge of the meaning of SBA loans, types, eligibility criteria, lists, application guides, and tips that should put things in place.

SBA LOAN MEANING


SBA is an acronym that stands for small business administration. It was formed on July 30 1953 by President Eisenhower when he signed the small business act. This was originally enacted as the small business act of 1953 in title ii. It is an agency set up by the UNITED STATES to aid small businesses, corporations, establishment, and entrepreneurs. SBA loans were made possible through banks, credit unions are other partnered lenders of the agency. Activities of the SBA can be summarized into capital, contracts, and counseling.

CAPITAL

The capital provision of the agency funds through the states allocating annual budgets. Meaning the agency allocates $990 million (2015). Although President Obama promised an increment in the next 5 years, there has been no record to that effect.

In addition, loans were assured to provide a 90% assurance to ensure strong capital for small businesses. The agency had proven itself by having a record lending volume in late 2010.


The agency opens its doors to failed firms & cultural innovations across the country with 5% off the annual budget. In view of aligning entrepreneurs to the lines of capital and credit to grow their businesses, the SBA franchise Directory was formed in March 2018

Read Also: List Of Federal Government Agriculture Grants

CONTRACTS


Awarding contracts is one of the genuine element of this agency. 0.23 per cent of federal government contracts to small businesses are efforts of the SBA. Small business contracting programs were set-up ensuring not to neglect women-owned, veteran-owned and service-disabled in the federal contrast. Some of the programs provided for businesses include Business Development Program and HUB Zone.  

COUNSELLING

Counseling of businesses by the SBA in forms of setting up at least one of its office in each of the US states.

Also, it created grants to support counseling partners which included over 900 small businesses Development centers (most likely located in universities and colleges).

Some of these counseling services include

  • A volunteer mentor corps of retired and experienced business leaders with approximately 350 chapters
  • A SCORE, 110 women’s business centers.

This services has been a tremendous success that it records over 1million services to small business owners yearly little wonder president Obama in 2012 elevated the SBA into the cabinet thus making the Administration of the SBA a cabinet-level position.

TYPES OF SBA LOANS

Different types of SBA loans include the following;

#1. SBA 7(a) loans

This loan set up the SBA as a financial element primarily to get funds into the pockets of small business owners and entrepreneurs.

Although this loan is not directly from the SBA, the agency helps small business owners to secure loans by assuring a portion of the borrowed amount. It also helps with limiting fees and reducing interest rates. Each loan focuses on meeting different needs hence; they address different businesses.

These loans contract in their loan amount and guarantees. Once a small business owner finds an SBA-approved lender the process of acquiring a loan can take the course. Majority of the SBA 7(a) loans allows small business owners up to $5million. This comes with guarantying 85% loans up to $150,000 and 75% of loans bigger than $150,000.

NB: The term 7(a) was drafted from section (a) of small business act of 1953.

 APPLICATION PROCESS FOR A SBA 7(a) LOAN

Process of getting this particular loan is not a hard as the approved SBA lender will be your aid all the way. Firstly you need to find an approved SBA lender with will be step taken after you have decided what you want to do the loan .Secondly proceed to the bank or credit union to sign documents presented, you would also need to make available your personal financial documents and that of your business .Upon completion of the documental affairs, with the aid of your lender, your loan will be available in 5-10 business days.

These types of loan, unlike the 7(a) loan make capital available for financing purchase of assets which mostly include real estate, machinery and building at low prices. Basically, the agency provides loan for three parties where the business owner puts 10% the lender or bank puts 50%. On the other hand, the CDC (Certified Development Company) puts the remaining 40%. These organizations pose as non-profit making organizations with the aim of aiding economic growth, especially in local areas.

The maximum amount of loan provided by the CDC is $5.5million for energy related policy goals and manufacturers and $5million for meeting defined policy goals.

ELIGIBILITY

Eligibility of getting this loan include factors as follows: the borrower should meet to the agency’s qualification of small business, the companies average income should not surpass $5million after taxes for 2years, the borrower should not have tangible net worth in excess of $15million, project size in mind should be greater than personal unencumbered liquid assets of the principals every importunately, ownership mus of 51% US citizens or registered aligns with green card.

The process of applying for this loan is the same as the 7(a) loan with the time limit to receive the loan while 7(a) loan take within 5-10 days, the 504 loans are within the range of 30-60 days which will become part of the regular monthly debenture sale

#2. SBA CDC/504 LOAN

This loan, unlike the 7(a) loan makes capital available for financing purchase of assets which mostly include real estate, machinery, and building at low prices. The agency provides loan for three parties where the business owner puts 10% the lender or bank puts 50% while the certified development company (CDC) puts the remaining 40%.

Organization set up with nonprofit making intentions to aid economic growth, especially in local areas. The maximum amount of loan provided by the CDC is $5.5million for energy-related policy goals and manufacturers and $5million for meeting defined policy goals.

ELIGIBILITY

These loan factors includes: the borrower must meet to the agency’s qualification of small business, the companies average income cannot surpass $5million after taxes for 2years, the borrower must not have tangible net worth in excess of $15million, project size in mind must be greater than personal unencumbered liquid assets of the principals every importunately, ownership made up of 51% US citizens or registered aligns with green card.

Applying for this loan is same with the 7(a) loan regarding time limit to receive the loan while 7(a) loan can be ready within 5-10 days ,the 504 loans take within the range of 30-60 days which will become part of the regular monthly debenture sale

#3. SBA micro loans

 The microloans provide up to $50,000 to aid small businesses and certain not profit childcare centers to start up as well as expand .average of this loan is $13,000 .The US government uses intermediaries for this particular loan as major tool to reaching small business owners. They provide funds to these intermediary lenders which are non-profit and as well as community-based who in turn render assistance called the microloan program to eligible borrowers. These loans serve for different purposes such as machinery or equipment need, furniture, supplies and working capital. The maximum repayment term for this loan is 6years.

APPLICATION FOR A MICROLOAN

Application for this loan vary from the previous ones because they consider several requirements including trainings and planning to get approval.

The reason for this training is to help you launch and expand your business. On completion of the training, find an SBA-approved intermediary in your area or community. The SBA-approved intermediary makes all credit decisions on SBA microloans.

Furthermore, as an SBA intermediary with the SBA itself involved, demanding approval from both parties, it takes up to 30-90 days. Patience is key for this particular loan.

NB: You cannot use profits from an SBA microloan to pay debts in existence or purchase real estate.

LIST OF SBA LOANS

The list below covers SBA loans which are less sort after outside the three major ones.

SBA EXPRESS

EXPORT EXPRESS

EXPORT WORKING CAPITAL

INTERNATIONAL TRADE

VETERANS ADVANTAGE

CAP lines

SPECIAL SBA LOANS

SBA MICROLOANS

SBA 7(a) LOAN

504 LOANS                    

HOW TO APPLY FOR AN SBA LOAN

Application for an SBA loan vary from one program to another especially with the different types for SBA loans .But there are basic steps which all SBA loans have in common that should be taken to acquire an SBA loans and they are:

  1. Know and be sure of your reason for applying for an SBA loan
  2. Check that you are eligible before you start your application
  3. Chose a desired program
  4. Find an approved SBA lender or intermediary as the case may be
  5. Gather your paperwork
  6. Fill out application
  7. Fill out the forms

After following these steps, you should wait for your loan according to its stipulated time limit for your SBA loan package type.

FREE TIPS TO ACQUIRING BEST SBA LOANS

Majority of people tend it’s a lot of paperwork but it’s just as similar as a day to day paperwork like a regular business loan. The SBA tend to appeal loans to entrepreneurs because they tend to have longer payment terms and lower interest rates than many other types of business financing and loans.

The steps to landing an SBA loan with ease are:

  1. Know how much you need
  2. Know your numbers because good credit and solid financials are often keys to getting an SBA loan.
  3. Ask for help don’t be a do all alone type of person in this case ensure to seek advice from counseling services, discuss your plan with an experienced mentor.
  4. Invest in insurance as a small business owner you shouldn’t neglect the importance of insurance.
  5. Knowledge of your business is also very important because the more you know your credits lose, competition of your business, the more you stand ready on getting an SBA loan.

These easy but important steps are all the basic do’s you need to know in acquiring for an SBA loan.

0 Shares:
Leave a Reply

Your email address will not be published. Required fields are marked *

You May Also Like
manual underwriting process
Read More

Manual Underwriting

Table of Contents Hide What is manual underwriting?Manual Underwriting MortgagesThe Process of Underwriting mortgageRequirementsManual underwriting FHAManual underwriting VA…