SBA Loans for Small Business

How do SBA Loans Function?

The US Small Business Administration (SBA) offers a variety of financial aid services expressly tailored to address the most critical funding needs of small companies. The SBA does not offer direct funding to small businesses. SBA then sets the lending criteria for its members, such as USA Funding Pros. If a company applies for a SBA loan, it generally seeks a commercial loan provided with a SBA guarantee according to SBA criteria. Small business bankers at USA Funding Pros will help respond to your queries and direct you through the entire SBA loan process.

How will a traditional small business take out a SBA loan?

Need to purchase / build your own systems A need for new equipment Refinancing of your current debt Business acquisition.

The benefits of a SBA loans for small business are:

• Long term working capital
• Lower monthly payments
• Fully amortizing loans
• Higher loan-to-value ratios
• Longer terms than traditional loans
• Lower down payments
• Fully amortizing the loans funded by or through SBA, whether you start or get capital from an existing company, must meet certain requirements.

First, the company that receives SBA funding shall be owned and operated separately and not dominantly in its industry, and must comply with jobs or sales requirements established by the company. Lending can not take place to financial businesses, media related businesses, firms engaging in gambling, lending, or investment, leisure, entertainment, or non-profit enterprises.504 Local growth enterprise program The 504 loan program offers long-term, fixed-price funding for small enterprises to purchase immovable equipment or machinery. The loans are handled by commercial lending institutions by Accredited Construction Companies (CDCs). Usually 504 loans are funded by 50 percent by the government, 40% by the CDC and 10 percent by the client.

In return for this lower-market fixed-rate funding, the SBA hopes that small businesses can build or maintain employment or meet other public policy objectives. Such policy goals are met by corporations with the advantage of growing business districts (e.g., an industrial zone), minority corporations or rural growth.

7(a) Guaranteed Loan Program

The SBA’s main corporate loan program is a General Corporate Loan Guarantee Program 7(a). It is typically used for business start-ups and to meet various short-and long-term needs of existing companies, such as purchasing equipment, working capital, leasing upgrades, inventory or buying real estate. In total, these loans are guaranteed up to 750,000 dollars. The guarantee limit is 80% on loans of $100,000 or less and 75% on loans of more than $100,000.

R&D Small businesses are crucial to driving innovation that can contribute to employment and economic growth.  In reality, they generate 16 times as many patents per employee as big corporations and universities and employ almost 40% of America’s scientists and engineers.  Federal agencies collaborate with creative small companies in the Small Business Innovation Research (SBIR) and the Small Business Technology Transfer (STTR) initiative to meet important policy research and development goals.  SBIR and STTR are granting more than 2 billion dollars per year to small enterprises in the federal government.  SBIR was re-approved in 2016 for five years.

Minority Entrepreneurs

The number of minority companies is still rising, increasing America’s competitive edge and unleashing economic growth.  During the past 10 years, the two million new companies started in the United States represented during 50% of minority businesses and produced 4.7 million jobs..  There are currently over four million minority businesses in the U.S., with annual revenue of almost $700 billion.

Export

Exports and e-commerce are a huge opportunity for the small companies of America to market to 95% of the world’s clients overseas.  Unfortunately, only 1 percent of SMEs are actually exporting.  To unlock this ability, the STEP helps small companies prepare for new markets, access export funding and engage in business missions.  The initiative has sponsored U.S. small business exports for over 1 billion dollars, producing a return on investment of 19 to 1 for taxpayers.  The STEP system was formally introduced in the 2015 Trade Facilitation and Compliance Act.  The Committee also promotes fair benefits for small companies in ensuring that they are included in future trade deals.

The SBA guaranteed loan guidelines are close to the traditional banking loans guidelines. Therefore, the company must apply for SBA requirements as a small business that differ from industry to industry.

The SBA insured loans ‘ interest rate is based on the prime rate. Although the SBA does not set interest rates as they are not the lender, the SBA controls the amount of interest that the lender can charge to the borrower. When the loan is seven years or longer, the SBA permits the borrower to charge up to 2.75% above the prevailing primary rate. The surcharge can be up to 2.25% if the loan has a period of less than seven years for SBA loans for small business.