Small Business Administration (SBA) Guaranteed Loan Program

posted in: Small Business | 0

Start-up businesses are a risky business.  According to SCORE at least 25% of all start-up businesses fail within the first year, 36% by year 2 and 50% by year 4.  To help minimize the risk to banks, the Small Business Administration has created a guaranteed loan program.  The guarantee is made by the SBA to the bank for a portion of the business loan.  The guarantee helps banks minimize their risk while still creating opportunities for economic growth by lending to new and existing businesses.
We looked for lenders that had an SBA guaranteed loan program to submit our loan applications to.  The process began with applying on the SBA website for lenders that work with them.  They ask a series of questions electronically pertaining to the business and the zip code of the future business.  They then submit it and respond to you with banks that are interested in your project with contact information.  The banks then contact you and you begin the application process.
You deal with the bank.  Once you are approved for financing by the bank, the bank deals with the SBA.  The SBA determines how much of the loan they will guarantee and any other specific terms they require.  Then you close on the loan with the bank and make the loan payments to the bank.
It should also be noted that you need to have good credit, a sound business plan, and collateral in order to qualify for a loan from both the bank and the SBA.