Things to Keep In Mind If You Are Planning To Apply For SBA Loans

In the current economic crisis, credit has become a bigger issue for most businesses. However, the smaller ones are the most impacted as the large business houses enjoy a long term relationship with the major creditors and hence are able to get their funds as needed. However, the smaller businesses and the startups struggle to meet the stringent requirements of the banks and often fail due to lack of the necessary funds.

In such a credit crunch situation, U.S Small Business Administration’s initiatives to assist the small business owners through various programs, proves very beneficial. These bad credit personal loan help in setting up or sustaining many small businesses across the country. They are more popular because of their easy norms and quick processing which helps the business owners get the required funds at the earliest.

So let us understand what these loans are and how can you avail them to make your business a success?

It is important to understand that the Small Business Administration, a federal agency does not directly provide any unsecured personal loans to the borrowers but only guarantees a certain portion of the dues in case the borrower is unable to pay back the borrowed funds.  So they provide guarantees on the borrowed funds which reduces the risks for the lender, hence the lender is able to offer the loans at better terms.

Since the U.S. Government noticed that the commercial credit industry was not very committed towards the development of the small scale businesses, hence it formed the Small Business Administration to promote the set up and sustenance of these businesses. The SBA, since its inception in 1953, has helped millions of the small scale businesses avail easy credit with the help of its guarantees, which otherwise would have been quite impossible for these businesses.  By diminishing the risk of funding to small businesses, which often fail more than the larger ones, the SBA-backed loans give a ray of hope to many deserving organizations to sustain their growth.
There are certain conditions these businesses need to fulfill, in order to qualify for the SBA-backed loans. In fact any business can apply for these loans, as long as they fulfill some of the basic criteria:

  • Private Funding Rejection: One of the basic conditions is that you should have been turned down by a bank or financial institution as the SBA cannot guarantee for loans that can be availed on their own.
  • Size of Business to meet the SBA standards: Before applying for a small business loan, it is important that you check if your business falls under the definition on a “small business” in that particular industry, under the SBA guidelines. It is normally defined on the basis of the annual revenue or the number of employees, depending on the industry.
  • Specific Loan Criteria: Your business may need to fulfill other conditions if you are applying for specific loan programs like the 7 a or a host of others. You should look at the particular eligibility criteria in detail before applying.
  • Understand the Lender’s requirement: In addition to the SBA’s qualifying criteria, your business needs to conform to the lender’s requirements too, therefore choose the lender with care. There are some “preferred vendors” too who are authorized to approve the loans, and hence your approval can be much faster.