The U.S. Small Business Administration (SBA) maintains a wide variety of loan and other assistance programs that can be valuable resources to all types of businesses. SBA programs offer excellent flexibility and loans that are “built to last,” says Brian Burke, national SBA lending director at Community Reinvestment Fund, USA, a nonprofit organization that works with banks and other lenders to bring development capital to underserved areas. However, finding and securing the best SBA loan for your business requires effort and diligence.
“SBA loans do involve more upfront effort, due diligence, and paperwork, but patience and positive attitudes are rewarded with excellent terms,” Burke says. You can boost your likelihood of approval for an SBA loan by knowing your numbers, or at least having a trusted advisor who can help you present all aspects of your business, especially the all-important financial characteristics. “Plan your work, and work your plan. Vision and execution are key drivers to long-term business success,” he adds.
It’s also important to keep in mind that the SBA doesn’t actually make loans itself; rather, it guarantees loans made by banks and other lenders, points out Michael K. Menerey, a partner in CFO Edge, LLC, a provider of outsourced financial and operational solutions to businesses. “In seeking a loan for your business, you need a bank that can be a trusted partner. This is especially true in the world of SBA lending, where knowledge of the various loan programs is critical,” he says.
Among the SBA programs of most interest to many small businesses are:
- SBA Microloans, which provide short-term loans of up to $50,000 to small businesses and some not-for-profits. Proceeds can be used for working capital, inventory, supplies, fixtures, and equipment but not for repayment of existing debts or purchase of real estate.
- SBAExpress loans, which offer expedited processing, generally range from $50,000 to $150,000, and can be used to launch a business or to assist in the acquisition, operation, or expansion of an existing business.
- SBA 7(a) loans, which go up to $5 million, are the agency’s most common product for helping small businesses obtain financing. They are also the most flexible, says Rohit Arora, CEO of Biz2Credit.com, an online small business loan matchmaker. The SBA can guarantee as much as 85 percent on loans of up to $150,000 and 75 percent on larger loans.
- SBA disaster loans, which are low-interest, long-term loans for physical and economic damage caused by a declared disaster. Small businesses and most private, nonprofit organizations that suffer substantial financial damages may be eligible for an Economic Injury Disaster Loan of up to $2 million. The proceeds can be used to meet necessary financial obligations related to expenses the business would not have incurred had the disaster not occurred.
“The type of SBA loan you choose depends on the amount of money needed and the use of the money once you borrow it,” Arora says. “Each business’s situation is different, and that will dictate the type of SBA loan for which you ought to apply.” A great resource for helping you find the SBA loan program that is right for your business is the federal government’s BusinessUSA AccessFinancing wizard. The tool walks you through four simple steps related to the purpose of the loan, ownership of your company, areas where you do business, and the industry in which you operate. A results page presents the best SBA options and other government-backed finance programs to meet your needs.
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