Small business SBA loans
If you are a small business who will ever want or consider getting any kind of loan or financing, it is important to understand SBA small business loans, and what they can do for you. SBA does not offer direct loans to small business owners. However, they partner will lenders to make it easier for small businesses to get loans. SBA guarantees a percentage of the loan, and structures the loans in order to make them more affordable for borrowers, and less risky for lenders.
These are the types of SBA loans available to small businesses:
Debt financing loans
SBA loans for debt financing are only for borrowers who can't obtain other financing or other financing with reasonable terms. These loans are offered by SBA partners such as commercial lenders, and are structured according to SBA requirements. The SBA guarantees a certain percentage of the loans, and restricts the borrowable amount, and interest rates.
Surety bond loans
These are loans that are part of the SBA bonding program of SBG program, which is a lot like debt financing. The way these loans work is that they help small business contractors obtain surety bonds when they can't get them through the traditional channels. A surety bond is an agreement between a surety, the project owner, and a contractor. These loans are set up so that the SBA will take over the loss if a contractor fails to meet the terms of the contract. In other words, if you are a small business contractor, SBA will vouch for you, and guarantee a percentage of the loss should you fail to meet your agreement, in doing so, you get increased bonding and opportunity. In other words, once again, SBA lessens the risk so that more businesses and lenders will help out small businesses.
In these SBA loans, SBIC's (privately owned and managed investment funds which are licensed and regulated by SBA) provide venture capital to small businesses. The SBICs are able to borrow at favorable rates from the SBA, and thus, they can provide more affordable debt and equity financing to small businesses as a result. SBA sets the regulations, and then the SBICs loan the venture capital to small businesses.
SBA loans come in a variety of packages. There are loans for refinancing bad real estate debt, for the underserved such as minorities and women, to help women get more government contracts, to expand your business into exports, and so much more. If you are a small business, and you want to get favorable rates and terms, with a backing by a government agency, check out the SBA.gov website for more information and eligibility requirements on the various SBA loans available. The site can also help you find the SBA certified commercial lenders in your state, and provide you with applications and forms to get started with your financing and loaning needs.