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8/14/08 10:27 am - Who can apply for an SBA Business Loan?
It is important to understand however, that the SBA does not directly provide financial loans or business loans. The SBA was designed to assist smaller businesses whose loan applications were declined by banks or private lenders. If you’ve tried applying for a business loan before and your application was rejected, you can contact the SBA for help. In turn, the SBA will be the one to assist you in finding the right lender who would be willing to grant you the loan you need.
There are 5 business loan programs available through the SBA. These are the Loan Guarantee Program for start-up and growing businesses; the 504 Fixed Asset Financing Program for business construction projects and land purchases; the MicroLoan Program which amounts up to $35,000; the Economic Development Program which provides free counseling and low-cost training; and the 8(a)-Business Development Program for those who are considered as socially and economically disadvantaged small business owners.
SBA Loan Restrictions
The approval of your loan depends on four basic elements- the type of your business, the size of your business, the purpose of your loan, and special circumstances.
To be approved, the applicant must be the owner or must have made a reasonable investment in the business. It should be a small business, meaning it should be independently owned and dominant in size. The business loan must be use for purchasing business equipment, stocks, real estate, for renovation, or as a working capital. Special Circumstances applies to business franchises, clubs, farms, fishing boats, schools, etc. The SBA has set special rules and regulations if a business falls to qualify under this category.
An SBA loan cannot be used to pay off existing debts or delinquent taxes. In some cases however, a business can be approved if it can present that refinancing would be beneficial for the company and that these debts were not a result of uncontrolled spending or financial mismanagement.
Who else are not qualified for an SBA loan? Certain business types are disqualified and these are businesses with questionable foundation or illegal activities. Examples are gambling businesses, pyramid schemes, lending activities, real estate investments, and the like. Non-profit and religious organizations are also not acceptable.
In summary, remember that:
- in order to be considered for an SBA loan, you must first have been turned down or rejected by a commercial business loan lender;
- the SBA does not directly provide business loans but coordinates with lenders and financial institutions on behalf of small businesses;
Irish Taylor is a bussiness loan consultant with Startup Business Loans and has been providing consumers and business owners with startup business financing since 1992. For years she has helped people with credit and loan problems especially pertaining to business start up, SBA loans and Unsecured loans.
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Darren Montville, Collins Correctional Facility, Collins, N.Y.
By Annalyn Censky, Fortune Small Business contributor