The U.S. Small Business Administration is an agency of the federal government , established in 1953 to assist Small Business Enterprises with Loans Guaranty ( Essentially an Insurance Company for loans given by banks to small business owners who just do not have level of sophistication major banks require to be approved for a loan).
The most important program operated the agency is the loan guaranty program, which provides a financial guaranty to qualified, eligible businesses to enhance their ability to obtain l long-term capital financing from banks.
In 2004 for example The SBA guaranteed more than $17.3 Billion in loans to more than 88,000 small businesses. In the process, the agency assisted with the creation of hundreds of thousands of jobs across The country.
Even though the SBA conducts many programs to assist small businesses, the focus of this article is on the assistance provided by the 7(a) Loan Guaranty Program, which provides a credit enhancement to participants Banks , and also the 504 Loan Program which I renamed ” The Small Business Financial Freedom Loan” ( will tell you why later), which is administered by through SBA-licensed certified development companies(CDC’S). You can get more information on these by visiting their association site NADCO . THE REGULATIONS GOVERNING THESE LOAN PROGRAMS AND COST ARE SUBJECT TO CHANGE FROM TIME TO TIME that’s why it is important that as Small Business Owners we watch the politicians very carefully when it comes to these programs because they are truly America’s Job Creation Machines. We need to make sure we don’t let the Washington people change these programs in the way that affects us .
I am providing this information with one goal in mind to help you understand the regulations, eligibility and qualifications so that you will be bale to put together an efficient and effctive development of commercial loan application( A Commercial is any Loan obtained for a business purpose).
The two primary SBA loan guaranty programs that are currently funded by congress for small businesses are the 79a0 Loan guaranty program and 504 Loan program( Name comes 50% first loan and 40% Government Loan guarantee or debenture). Thy are governed by different regulations and distinguished by : eligibility standards, restrictions on the use of loan proceeds, repayment terms and the Borrower( You) own’s credit approval process. These two programs are described below in order for borrower to understand what kind of funding( Money) can be obtained through The SBA.
The 7(a) Loan program is the primary loan guaranty program of the SBA. Because its profitability for the banks, it is also the most recommended by lenders. This loan can be used to buy a business, improvements of assets, refinancing existing debt, working capital. Repayment terms are determined by the actual use of the loan proceeds:
1. Real Estate Loans can be extended for up to a maximum of twenty-five years ( usually twenty years for refinanced real estate loans)
2. Equipment Loans can be extended for up to maximum of 15 Years though usually limited to ten or to the expected useful life of the acquired equipment, whichever is shorter.
3. Business acquisition loans can extended for up to a maximum of ten 10 years
4.Working Capital loans can be extended for up to seven years
Currently The SBA guarantees the loans for up to 75% of the total loan amount (80% for loans under$150,000) to a maximum guaranty of $1,500,000. The maximum allowed is a $2,000,000 loan under the 7(a) program
Eligibility to participate in the 7(a) program is limited by maximum level of either the borrower’s revenues or the total number of employees, as defined by the SBA, according to borrower’s North American Industrial classification system (NAICS). A complete list of NAICS site with corresponding SBA limitations.
Most businesses that produce no more than $6 Million in total revenues or have no more than five hundred employees are eligible for SBA assistance, although the industries that are limited by the number of employees can generally exceed $6 Million in revenues. The 7(a) Loans provide for all amortization of the loan.
There are several special-purpose loan programs under the umbrella of 7(a) program that enable you to qualify under certain conditions that may not otherwise be available. These special initiative programs are primarily intended to assist the Banks in accomplishing specific public-policy objectives and involve the following borrower categories:
1. Community Express(This program is designed for low and moderate income individuals and new market Business)
2. Veteran Loan Program(( Vietnam era veterans)
3. Disabled Assistance Loan Program
4. Energy Conservation Loan program( The program is geared towards businesses in energy efficiency industry)
5. Qualified Employee Trusts Loan Program
6. Pollution Control Loan Program
7. Export Working Capital Program
8. International Trade Loan Program
9. Defense Loan and Technical Assistance Program
10. U.S Community Adjustment and Investments Program( CAIP) This program
11. CAP lines_ This loan program is designed to help small businesses with short-term and cyclical financing working capital needs.
The SBA also has outreach resources available for specific special interests which include financing initiatives as well as other services. These special interest include:
Anyone looking to take advantage these programs www.sba.gov
although a lot types of different businesses are eligible to participate in the SBA loans programs, these if you business does fit in any of the list below chances are you qualify:
1. Non Profit Corporations
2. Gambling and illegal activities
3. Investments Real property
4. Pyramid Sales organizations
5. Speculative types businesses
7. Lewd or prurient goods or services
Dedicated to your success,
P.S. Stay tune for the next blog I will talk about The SBA micro Loan program