Small Business Administration Loans

According to recent research, the economy of every developed or developing nation depends on numerous small-scale industries. So it becomes necessary for the respective government to provide adequate security to the small-scale entrepreneur in establishing their business. Aiming this almost every developing nation has a government organization named the Small Business Administration (SBA) that has setup certain rules for the private financial institution that provide finance to small scale industry owner. The duty of SBA is to protect and promote small-scale industries by guaranteeing small business loans by private lenders. These are called Small Business Administration Loans. As private lenders work under the guidelines prepared by SBA, borrowers obtain better loan terms with reasonable interest rate.

Small business administration loans are only provided by SBA approved lenders. These loans as a whole includes different kind of loan plans and a single lender don’t provide all kinds of loans. These are generally long term small business loans but the loan maturity plan depends on the ability to repay the loan and the loan prospect. However, the loan maturity period can be go up to 25 years.

Eligibility Criteria:

As we know small business administration loans are only for promoting and financing small business plans all are not eligible for this. So the size of the company plays a big role in obtaining SBA loan. Both the total number of employees and the average annual revenue of the company act as major points in the qualifying process. If the numbers in both the cases found higher than the fixed number in the SBA guideline then the loan application can be cancelled. Again the organization should be an independently owned organization.

Application Process:

The Small business administration loan provider required certain information regarding the business proposal and the borrower. The borrower has to provide the following information.

• A business profile describing the types of business, annual sales revenue, number of employee and the history of organization.
• Required amount of money and the proposed plan to spend it.
• Financial statement of the company that includes profit or loss in each year and in general cash flows.
• Personal financial statement with personal tax return and a copy of your credit record.
• Lenders also ask for another personal financial statement of a person that holds at least 20% share of the company as a guarantor.

Approval Process:

After collecting all the required documents and information, the application is submitted to the Small Business Administration for consideration. After approval, the administration sends a letter to the lender stating its intention to guarantee the loan. In this case the Small Business Administration can guarantee a maximum of 75% of the total loan amount.