The Small Business Administration agency has become almost a mainstream source of financing for small businesses. The U.S. Small Business Administration, established in 1953, provides financial, technical and management assistance to help Americans start, run, and grow their businesses. With a portfolio of business loans, loan guarantees and disaster loans worth more than $45 billion, in addition to a venture capital portfolio of $13 billion, SBA is the nation's largest single financial backer of small businesses. Every year, the SBA offered management and technical assistance to more than one million small business owners did. The SBA also plays a major role in the government's disaster relief efforts by making low-interest recovery loans to both homeowners and businesses.

How does the SBA work?

Contrary to popular belief, the primary function of the SBA is not lending money, but acting as an "insurance" agency for banks. The reason behind this is that they can achieve much more using their budget this way than just lending it out themselves. They also lend money directly, but it is a very small portion compared to the amount they guarantee. The following is a list of the loan programs offered by the agency that have the largest impact on you as a small business owner:

 The lowdoc loan program:

This is a personal favorite of mine. Regrettably, I have never actually worked with a lowdoc request. I like this program because of its quickness. Supposedly, a prospective borrower could have an answer in a couple of days. The program is limited to a maximum amount of $150,000.

The 7a Loan Guaranty:

The 7(a) Loan Guaranty Program is the SBA's primary lending program. It provides loans to small businesses unable to secure financing on reasonable terms through normal lending channels. The program operates through private-sector lenders that provide loans which are, in turn, guaranteed by the SBA.

 CDC – 504 Loan:

The 504 Certified Development Company (CDC) Program provides growing businesses with long-term, fixed-rate financing for major fixed assets, such as land and buildings. A Certified Development Company is a nonprofit corporation set up to contribute to the economic development of its community. CDCs work with the SBA and private-sector lenders to provide financing to small businesses. Typically, a 504 project includes a loan secured with a senior lien from a private-sector lender covering up to 50 percent of the project cost, a loan secured with a junior lien from the CDC (backed by a 100 percent SBA-guaranteed debenture) covering up to 40 percent of the cost, and a contribution of at least 10 percent equity from the small business. In other words, it is a loan program that helps businesses buy buildings to house their operations using only 10% down payment, a bank that lends 50% and the sells a second mortgage to investors that hold a second mortgage in the property.

The three programs listed above are the most common types of SBA loans that you might encounter or need. The agency also offers many other types of programs. Call us to find out the type of programs.

Some questions about getting an SBA loan

What are questions asked?

Your loan consultant will want to discuss your proposal in depth. He will ask you for both financial information on yourself and your business and personal information about you to determine your business experience. If the request is related to a business you are thinking of starting, the officer will want to see a business plan.

What does the SBA wants to see in my application?

Call us for more information regarding SBA Loans. We'll be happy to answer any questions you may have.