Money for Small Business | Small Business Startup Loans

Small Business Startup Loans

The modern day American entrepreneur faces challenging times and tight business environment. Despite the economic slow-down enterprising Americans have the chance to make a go of their business propositions given the right tools – a clear vision, a solid business plan and adequate capital. The first two requirements are inherent in the business owner. The last item, however, presents a stumbling block for most start-ups.

There is an agency that can help the American entrepreneur realize his business goals. The U.S. Small Business Administration was founded in 1953 to provide financial assistance to start-ups including small business loans, disaster loan programs and contractor bonding. Since its inception, the agency has granted assistance to some 20 million small businesses. Its current portfolio is estimated at $45 billion.

Small business owners can apply for several financial assistance programs for small businesses such as the Basic 7(a) Loan Guaranty, the Certified Development Company (CDC), and the Microloan. SBA administers these three programs while its partner lending institutions provide the funds for the small business loans. The guaranty provided by SBA on these loans takes the risks of borrower default off the backs of its lending partners.

To qualify for an SBA loan, a small business owner should meet the following basic requirements:

1. The borrower should have a loan application that has been rejected by a bank or a financing institution. SBA only extends assistance to those who are otherwise ineligible to get financial aid on their own.

2. A business and personal guarantee is required to qualify for an SBA loan. It is important to ascertain the repayment capabilities of a borrower to be considered for an SBA loan. Good character, management capability, collateral and equity contribution of owners are necessary considerations for an SBA loan approval. All owners with significant share in the business are required to submit personal guarantees on the SBA loan.

3. The borrower’s business should operate for profit in the United States, have reasonable owner equity to invest, and have other available alternative financial resources to use. Only borrowers with businesses that meet the eligibility requirements set by SBA in terms of business demographics (size, type of business, scope of operations etc.) could be approved for SBA loans.

4. The borrower should choose to have loan repayment terms of a maximum of 25 years. Working capital loans, however, are supposed to be repaid in shorter tenors of anywhere from five to ten years. The SBA evaluation of a borrower’s application would delve into whether or not the borrower will be able to sustain repayment amounts during the loan tenor.

SBA can provide small business guarantees of as much as 85% on loans up to $150,000, up to a maximum guarantee amount of $1 million. This guarantee is only provided to those securing small business loans from SBA partner lending institutions. With a strong business plan, a clear vision and some indication on potential business performance, it is not difficult to apply for a small business loan and work your way to achieve success in any chosen business endeavour.

Popularity: 28% [?]

Share and Enjoy:
  • Digg
  • Sphinn
  • del.icio.us
  • Facebook
  • Mixx
  • Google

Filed Under start-up loans | Leave a Comment

Tagged With , ,

Comments

Leave a Reply