When Investors Say No - Maybe Your Bank Will Say Yes (with a Little Help from the Government)

Share Article

The Small Business Administration can really help small / startup businesses. SBA loans are provided to the borrowers against a guarantee for a percentage of loan amounts, if deemed necessary by the SBA loan providers.

Every investor said no - so where should a small business owner go for financing? The answer may shock you - they should go back to their bank! This is not your average loan - its backed by the Small Business Administration -


Small Business Administration (SBA) loans are provided to loan seekers under section 7(a) of the Small Business Act. This Act gives power to the Agency to sanction loans to American Small Businesses. Founded on July 30, 1953, the U.S. small Business Administration has provided loans, loan guarantees, contracts, counseling and other type of assistance to small businesses. Most American banks and non-banking lenders participate with SBA in 7(a) loan program.

SBA loans are provided to the borrowers against a guarantee for a percentage of loan amounts, if deemed necessary by the SBA loan providers. In case of default, the Agency is, in no way responsible to pay the entire amount – it only reimburses the guaranteed amount to the commercial lender. The borrower is obligated to pay the entire loan. The Government or the Agency (SBA) can neither offer loans as it does not have resources nor can it compel the lender to provide the loan. A loan applicant should contact the lender directly and not SBA.

Loan seekers repayment ability is the top consideration in sanctioning these loans. Other important considerations like good character, management capability, collateral and business owner equity also play an important role in sanctioning of a loan. Apart from the above conditions, the eligibility requirements are quite flexible and accommodate a varied range of small business financing. Factors like size, type of business, use of proceeds and availability of funds from other sources are taken into consideration. Business should be earning profit and should not already be using its internal sources. The business head, is required to submit a “Statement of Personal History” to check his past credit record and other tangible matters and to prove his credit worthiness.

There are certain provisions that apply to most of the SBA loans. Variations can occur for some loan programs such as the limit of maximum loan amount to be provided, maturity terms, rate of interest applied, percentage of Guaranty, Loan fee charged by SBA and pre-payment penalties. All these terms and conditions are settled between an applicant and the participating financer, according to the requirements of the SBA.

Learn more about the SBA loan program for your startup company (programs for minority and woman owned businesses):


Reprint rights: You are free to use / reprint this article - please just include the below copyright and URL / link to website:

(C) 2005 HJ Ventures International, Inc.


# # #

Share article on social media or email:

View article via:

Pdf Print

Contact Author

H. Schwartz
Visit website