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SBA Financing

An SBA loan can be the best financing option for many small businesses. The SBA offers various programs that meet the needs of most businesses.

The SBA (Small Business Administration) is a government agency that guarantees loans made through private lenders and nonprofit lending institutions. Loan guarantees apply to small businesses that have demonstrated potential, but are otherwise unable to qualify for loans from traditional financing sources. A lender might consider a small business loan too risky under their normal underwriting criteria, but the presence of a federal government loan guaranty mitigates the risk.

IFS focuses on the SBA's two major programs: The SBA (7) Loan Program and The SBA 504 Loan Program.

Some of the advantages of SBA financing include:

	Longer terms than most conventional loans
	Improved cash flow and working capital position
	Higher LTV (loan-to-value) on real estate projects
	Lower capital requirements

Who qualifies for an SBA loan? The vast majority of businesses are eligible for financial assistance from the SBA. To qualify, you must:

	Operate the business for profit
	Be engaged in, or propose to do business in the United States
	Have a stake in your business

The SBA and the lenders primarily consider the following factors in their loan decision:

	Repayment Ability: Ability to repay the loan on time from the projected operating cash flow
	Financial Condition: Acceptable balance sheet ratios, adequate equity in the business, or sufficient investment from the owner (if a start-up)
	Collateral: Adequate to secure the loan (although as a general rule, the SBA will not turn down a loan request due to lack of collateral)
	Creditworthiness: Does the borrower have a history of repaying debts on time?
	Character: The business owner(s) must be of good character

Your application is more desirable to the SBA and the lenders if:

	Management has demonstrated experience and expertise in the line of business
	You have prepared a feasible business plan that details how the business will make money

Loans cannot be made to businesses engaged in: speculation, real estate investments, lending, pyramid sales plans, gambling, and illegal activities. Charitable, religious, and non-profit institutions are also ineligible for an SBA loan.

What Is Considered A Small Business? Over 90% of the nation's companies are classified as "small" by SBA size standards, with limitations on dollar volume and number of employees set according to industry. Almost every type of business qualifies for an SBA Guaranteed Loan.

	Manufacturing: Ranges from 500 to 1,500 employees depending on the company's industry
	Wholesale: No more than 100 employees
	Services: Annual sales not to exceed $6 million, up to $25 Million depending on the industry
	Retailing: Annual sales not to exceed $6 million, up to $25 Million depending on the industry
	General Construction: Annual sales not to exceed $27.5 million
	Special Trade Construction: Annual sales not to exceed $11.5 million

All owners of twenty percent (20%) or more are required to personally guarantee SBA loans.

For specific information about SBA's major programs click on:

The SBA 7(a) Loan Program
The SBA 504 Loan Program

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