By Mike Stevens
Business bank loans can be hard to come by for some companies. When credit freezes up or a firm experiences financial distress, that business may find it more difficult to get a loan. Where can small businesses turn to when the regular route of obtaining a loan through a bank isn't possible?
The best partner small businesses have is the Small Business Administration (SBA). Both large financial institutions and small community banks partner with the SBA to provide lending for businesses, even during tough times. The SBA's Guaranteed Loan program is designed specifically to make it easier for banks to provide loans at favorable terms.
With the backing of the government, business bank loans made through the SBA's lending program are mutually beneficial to both the bank and the borrower. The bank is able to serve the needs of the community and potentially profit from the loan, and borrowers are able to secure loans at favorable terms because the bank has a guarantee from the SBA.
It surprises a lot of businesses to know that while they may not qualify for ordinary business bank loans, they may qualify for a loan from a bank through one of the SBA's lending programs.
Just like regular business bank loans, an SBA loan must be applied for at a bank or lender that participates in the program. Just as with a regular loan, small businesses must provide financial information to the lender along with a plan for how the funds will be used.
To qualify for an SBA loan, small businesses should find out what programs are available and get their application ready. Have all of the information the lender and SBA need to make a decision.
There are multiple lending programs offered by the SBA. Not all banks participate in each one, so small businesses may need to do a little research to find those that apply. You can find out more about each program by visiting the SBA's official website at SBA.gov.
The SBA's most prevalent lending program is the 7(a) loan program in which many banks participate. Funds requested through a 7(a) loan can be applied to working capital, machinery and equipment, furniture and fixtures, land and building, leasehold improvements, and in some cases, debt refinancing.
The SBA is charged with providing support for businesses based on the current economic environment. Small businesses would benefit from knowing what current SBA loan programs are available and those that are forthcoming.
There are numerous advantages to working with the SBA. It really is one of the most important resources for small businesses looking to obtain loans. Yet the SBA isn't the only source of capital outside of business bank loans. The great thing about the SBA is that it can provide small business with the information they need to find alternate loan sources.