If your small business needs funds, and you have not previously applied for or had difficulty securing a loan in the past, an SBA loan may be your best option.
In 2014 the SBA initiated loans at record levels. Through it’s primary mechanism, the 7(a) Loan Program, the SBA had approved 52,044 7(a) loans for nearly $20 billion, an increase of 12 percent in the number of loans and 7.4 percent in dollar amount over the previous year.
How does an SBA loan work?
SBA loans are not direct loans from the federal government. Instead, the SBA provides a guarantee to banks and lenders for the money they lend to small businesses owners. The loans are provided through traditional lenders through commercial loans. Many approved lenders are located in Alachua County.
Through the SBA insured loans, the risk to the lender is minimized because the SBA guarantees to repay a portion of a loan if the small business owner defaults. This backing opens up loan opportunities to higher risk start-ups and established small businesses.
Look here for more specific information on the SBA’s role in the process.
What types of loans are available?
There are several types of loans that business can take advantage of, each developed to suit the needs of your business. The 7(a) loan program, for example, can be used for a number of purposes including working capital, revolving funds, equipment purchases, refinance existing debt, and more. This short video provides the low-down on 7(a) and is worth a look.
SBA also offers export-assistance loans (which grew by 3.7 percent this year) as well as financing for seasonal working capital (CAPLine), or major fixed-assets such as equipment, or real estate (CDC/504 loans).
In addition, SBA can help business owners in need of financing to help with disaster recovery. Disaster loans – available to homeowners, renters, businesses of all sizes and private, nonprofit organizations – can be used to repair or replace items that have been damaged or destroyed in a declared disaster including, real estate, personal property, machinery and equipment and inventory and business assets.
If you are looking for smaller loan amounts (under $50,000), consider the Microloan program or the SBA Express program. A subset of the 7(a) loan program, SBA Express is designed for businesses with financing needs up to $350,000. The proceeds can be used to finance a variety of business activities, and no collateral is required for loans up to $25,000.
It is also worth knowing that fees on all SBA loans are currently extremely favorable to veterans, and are currently set at zero for loans under $150,000.
Which loan is right for me?
Still not sure if there’s a loan for your particular need? Check out this loans wizard from BusinessUSA.gov. In a few steps, it will point you to the right kind of financing.
What is the process for loan approval?
Small business owners apply for SBA loans through traditional lenders. Since the loans are actually provided by the lending institutions, the loan applications are processed according to criteria established by each lender. The lenders apply standard credit factors such as cash flow and equity when considering each loan application. There are certain requirements that the SBA has in place, as well. The SBA requirements can be found at http://www.sba.gov/content/7a-loan-program-eligibility.
What information will I need to provide to the lender?
The lender will likely want to see standard items such as a business plan, income statements, credit reports, and income tax returns, along with other background information. The SBA provides a loan application checklist, outlining what you will need to prepare in advance of your loan application. This online course also explains how to prepare a loan package.
For a complete overview of SBA’s loans programs, visit the Small Business Loans Guide on SBA.gov.
Here is a listing of approved lenders in Alachua County:
First Community Bank SW Florida
3520 NW 43rd Street
Gainesville, FL 32606
Contact: Matthew Braddy, SVP
Florida Citizens Bank
3919 West Newberry Road
Gainesville, FL 32607
Contact: Mark Wellner, VP
Florida Credit Union
1615 Northwest 80
Gainesville, FL 32606
Contact: Laude Arnaldi, LO
Merchants & Southern Bank
Specialty Loan Programs: SBAX, PTX
3631 North Main Street
Gainesville, FL 32609
Contact: Greg Grisson
SunState Federal Credit Union
405 Southeast 2nd Place
Gainesville, FL 32602
Contact: Joe Bour, SVP