Frequently Asked SBA Loan Questions
Q: How do I apply for an SBA Loan Guarantee?
A: SBA has three different loan programs. Each of the programs is designed to cover a variety of business needs, thus providing the most options to small businesses. Contact one of our business banking experts. Be prepared to discuss your proposal in detail with the lender. You should have the following available for the lenders review: your business plan; your personal financial statements; your business financial statements (if already a business); collateral available to secure the loan; assumptions used in your projected earnings statements; management resumes of those involved in operating the business; and pro-forma balance sheets showing what the business would look like if the loan were granted.
Q: What do I need to qualify for an SBA Loan?
A: In order to get a 7(a) loan, the applicant must first be eligible. Repayment ability from the cash flow of the business is a primary consideration in the SBA loan decision process but good character, management capability, collateral, and owner's equity contribution are also important considerations. All owners of 20 percent or more are required to personally guarantee SBA loans.
Q: What type of collateral do I need for a loan?
A:Repayment ability from the cash flow of the business is a primary consideration in the SBA loan decision process but good character, management capability, collateral and owner’s equity contribution are also important considerations. All owners of twenty percent (20%) or more of the business are required to personally guarantee the SBA loan. The SBA does not deny approval for a SBA guaranty loan solely due to lack of collateral; however, it can be used as a reason, in addition to other credit factors.
Q: How does the SBA guarantee loan program work?
A: Under the guaranty concept, commercial lenders make and administer the loans. The business applies to a lender for their financing. The lender decides if they will make the loan internally or if the application has some weaknesses which, in their opinion, will require an SBA guaranty if the loan is to be made. The guaranty which SBA provides is only available to the lender. It assures the lender that in the event the borrower does not repay their obligation and a payment default occurs, the Government will reimburse the lender for its loss, up to the percentage of SBA's guaranty. Under this program, the borrower remains obligated for the full amount due.
Q: How long do I have to repay a SBA loan?
A:A: The repayment term is generally between five and twenty-five years depending on the life of the assets being financed and the cash needs of the business. Working capital loans (inventory and accounts receivable) should be repaid in five to ten years. The SBA also has short-term loan guarantee programs.
Q: What types of Businesses are Eligible for SBA Loan Programs?
A:The vast majority of businesses are eligible for financial assistance from the SBA. However, applicant businesses must operate for profit; be engaged in, or propose to do business in, the United States or its possessions; have reasonable owner equity to invest; and, use alternative financial resources first including personal assets. It should be noted that some businesses are ineligible for financial assistance.
