What is an SBA Business Loan?
An SBA business loan is a debt
instrument provided by you to by a lending institution that has been guaranteed
by the
United States government through the Small
Business Administration. Many entrepreneurs wrongly think that it is the federal
government that grants the loan. This is not the case. With an SBA loan, the
government essentially acts as your cosigner for the loan. In the event that you
default on the business loan, the
US government will provide the bank with a
reimbursement for the loan. As such, banks love to make SBA loans as they
present very little risk to the bank, provide small business owners with the
capital that they need, and increase activity in community bank branches – all
while making a nice profit for themselves.
Applying for an SBA business
loan is a difficult process despite the fact that the only limitations regarding
who can apply is that you must be of good moral character (ie. no criminal
record) and an American citizen. You should be immediately aware that receiving
approval from the SBA to receive a loan is a difficult process and can take
anywhere from 45 to 180 days depending on how well you have prepared the
appropriate documentation and business plan for the business loan.
The documentation required to
obtain a business loan that is backed by the SBA is significantly larger than
that of a conventional business loan. Additionally, there are several different
SBA loan programs that are available to you depending on your borrowing needs.
These loan programs include, but are not limited to:
- SBA 504 Loan
- SBA 7(a) Loan
- Express
Program Loans
- Military
Veteran Business Loans
- Rural
Business Loans
- Micro
Business Loans
When determining which SBA loan
is right for you, you should always consult with a properly trained accountant
or financial advisor that can take into account your entire business and
personal financial situation.