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The Small Business Administration (SBA) has assisted entrepreneurs and business owners in obtaining financing for more than six decades. Although the SBA doesn’t actually provide financing, it acts as a facilitator and guarantor to make it easier for small businesses to obtain financing from private lenders that might otherwise be unavailable. Essentially, an SBA loan guarantee provides assurance to a lender that the loan will be repaid in the event of a default.
SBA loans are available to businesses that are deemed to have a profitable outlook and funds may be used to cover the costs associated with business expansion. Loans are granted based on a string of criteria including credit standing, character of the owners, an assessment of the long term business prospects and the loan purpose. As the guarantor of the loan, the Small Business Administration (SBA) gives the private lender the assurance that up to 80% of the loan will be covered by government funds in the event of a default (under the Small Business Jobs Act the guarantee was increased to 90%). The borrower puts up the remaining 10%, so the risk to the lender is extremely low.
Small Business Administration (SBA) Loan Programs
7(a) Loan Guaranty Program
The most widely used loan program offered by the SBA is its 7(a) Loan Guaranty Program which assists small businesses that need between $50,000 and $2 million in securing loans. They require as little as 10% down and the length of the loan ranges from 10 to 20 years. The proceeds can be applied to a wide variety of business expansion needs including the refinancing of debt.
504 Fixed Asset Financing
Businesses that need financing for buying real estate or equipment for expansion purposes can obtain favorable loan terms with this SBA program. Working in concert with Certified Development Companies (CDC’s), the SBA will underwrite up to 40% of the total loan and the lender will take a 50% senior lien position. The borrower puts up the remaining 10%. The CDC loans are available up to $6.5 million and are offered to businesses that also include community enhancement as part of their business plans.
What to Know about Small Business Administration (SBA) Loan Programs
It is important to know that the SBA doesn’t actually lend money; rather it works through approved preferred lenders such as Third National Bank. In fact, businesses can only access SBA loan programs through an SBA lender. Working with the right SBA lender is essential because SBA policies and procedures do change, and only the most experienced lenders can help businesses navigate expeditiously through the application and pre-qualification process.
As an active, experienced SBA lender, Third National Bank uses its own applications and internal credit underwriting guidelines to make the SBA loan process simple, fast and convenient for you.
Our Small Business Administration (SBA) lending specialists are available to meet right now to discuss the program’s requirements and help you assess your eligibility for an SBA loan guarantee. Contact one of our business specialists today to schedule your consultation. Call 1 (877) 554-5535 or visit your nearest Third National Bank branch.