The Small Business Administration (SBA) guarantee loan program is probably one of the best-kept secrets in business financing today. Long perceived as a Federal bureaucracy catering to minorities and the economically disadvantaged, the SBA actually enables many successful small businesses to borrow on more favorable terms than they could obtain on their own merits.

Myths and Facts About SBA Loans

Borrowers frequently have misconceptions about using government programs to help their businesses. The following myths and facts reflect the truth about SBA guaranteed loans:

Myths About SBA Loans

  • SBA guarantees loans that are high risk or otherwise unbankable
  • SBA guaranteed loans have large prepayment penalties
  • SBA loans are made primarily to minorities and the economically disadvantaged
  • SBA requires collateral that includes everything the borrower owns
  • SBA loan process is paper-intensive
  • SBA loan approval process takes 6 months
  • SBA runs the business
  • SBA is a lender of last resort

Facts About SBA Loans

  • SBA guarantees loans using essentially the same credit criteria banks use
  • SBA guarantees loans on terms that might not otherwise be available
  • SBA loan approval has been issued in 3 business days of submission to SBA
  • SBA guaranteed loans can be funded within 30 days
  • SBA generally does not impose a job creation requirement

Purposes and Uses for SBA Loans

  • Construction of new business facilities
  • Construction of leasehold improvements
  • Enhancement of working capital
  • Purchase of equipment and inventory
  • Purchase of existing business or franchise
  • Purchase or refinance of business facilities
  • Refinance of payables or other debt

One Type of SBA Loan Program - "LowDoc"

Loans of $100,000 or less

Who Qualifies:

  • New business startups
  • Businesses with:
    • Sales less than $5 million and
    • Fewer than 100 employees

What the Applicant Does:

  • Completes front of one-page SBA application
  • Provides personal financial statements for all guarantors
  • Provides other financial information requested by bank, which may include:
    • Company financial statements/tax returns
    • Financial projections
    • Business plan

What the Bank Does:

  • Performs credit analysis based on standard SBA criteria
  • Prepares internal report, including cash flow analysis and proforma balance sheet
  • Completes back of one-page SBA application

Other Types of SBA Loan Programs

The SBA Web Site Map is Excellent
The index menus and the site search engine are easy to use and put extensive information at your finger tips!
For example: obtain forms and publications at SBA's online library.