How to Apply and Get Government (SBA) Loans for a Small Business

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How to Apply and Get Government (SBA) Loans for a Small Business.

Apply & Get Government (SBA) Loans… Government business loans are made available via banks and direct lenders who team up with the SBA. The SBA loan ade loans which are long-term and have low interest rates which owners of small businesses can use as capital to begin and fund their businesses, or purchases real estate properties, or to fund other business ventures.

How to Apply and Get Government (SBA) Loans for a Small Business

If you are an entrepreneur, considering SBA loans in the foreseeable future for funding your business is something you should do. SBA loans interest rates are the lowest anywhere in the country and the requirements for eligibility when it comes to SBA loans are the easiest to meet.

You would have to bear in mind that there is no one SBA loan which fits the need of every entrepreneur out there so you would have to search through the several SBA loan programs which would also be listed and explained as this article progresses to discover which is best for you. So do take your time to read carefully so you best understand what SBA government loans for small businesses are about and the best one to go for.

How to apply for government SBA loan would also be explained in details. There’s a lot to learn so do read on!

Why Small Businesses and Entrepreneurs Need Government SBA Loans.

Even though many banks and money lenders of loans most times give loans at interest rates which can be easily paid, many are unwilling to give loans to entrepreneurs and small businesses because of fear of not being able to recoup their money back.

This reasons are why eligibility requirements are stated for borrowers become they can get government SBA Loans from lenders.

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ELIGIBILITY FOR GOVERNMENT SBA LOANS.

SBA basically means “Small Business Adminstration”. If you are an entrepreneur who owns a small business, your best bet for getting favourable loans is applying for government business loans for many reasons that would be explained later in the article.

If you as a borrower doesn’t pay your SBA loans as at when due, the SBA would have to pay back the lender and the money to be paid back to the lend is from the money you as a borrower paid at the beginning of the loan and from the taxes gotten.

To deter people who keep defaulting on their loans, the SBA and banks have made sure the requirements for eligibility to get SBA funding are very high and strict which would attract only serious persons.

To be eligible for government SBA Loans, you have to meet the requirements stated below which are:

  • You must have a strong personal credit score of which more than 680 is the most preferred
  • Your time and capital (money) must have been put into the business you seek loan for
  • You must show proof of the government SBA loan being your last resort by proofing your loan applications from other financial sources were not granted
  • The business you applied for must be yielding position results and financially viable
  • The business you are seeking the SBA loan to fund must be more than two years old

A Summary of Government SBA Loans.

Several SBA loan schemes abound with the loan limit differing and the things the SBA loans can be used to do or fund. And they are stated below.

Types of SBA Loans for Small Businesses.

The 3 main type of SBA loan programs are:

  1. 7(a) Loan Program
  2. 504/CDC Loan Program
  3. Microloan Program
  4. 7(a) Loan Program
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The 7(a) Loan Program is the most sought after SBA loan program by entrepreneurs and SMEs.

The 7(a) Loan Program is basically a loan which has a term used to fund many purpose, especially general working capital loans. In the 7(a) loan program, a bank would lend a large sum of money to you and you would have to repay the loan with the interest over a fixed period which has been agreed on for repaynent and the entrepreneur can borrow a maximum of $5 million.

7(a) Loan fees

  • Loans below $150,000: no fee required
  • Loans from $150,000 (0.25%) for validity of 1 year or less
  • Loans between $150,000 and $700,000  (3%) for validity od more than 1 year
  • Loans from $700,000 above (3%)
  • Loans from $1 million (3.75%)

7(a) Loan Interest Rate Maximum

  • Under 7 years maturity : +2.25%
  • Above 7 years maturity: +2.75%
  • Below $50, 000 and fast-tracked loans: Higher than the above rates
  1. 504/CDC Loan Program

If you seek to buy or improve the quality of your business facilities then the 504/CD Loan Program is best for this.

Parties involved when offering 504/CDC Loans

A CDC (which means Certified Development Company)  is an SBA-verified community lender operating for no profit with the aim of improving the community’s exonomic development and lends 40% of the loan

The Bank: lends 50% of the total loan

The borrower provides 10% of the loan wanted as down payment and the exact percent is higher if you are a new business or engaged in some types of business projects

504/CDC Loan fees, maximum loan and duration

You get get a maximum of about $13 million which would need you to prove you would employ many people , the industry type and your community development plans. You would pay 3% of the loan.

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The CDC / 504 loan interest rate is 5%.

  1. SBA Microloan Program

The SBA micro loan program has a minimum amount of $5,000 and a maximum amount of $50,000. SBA Microloan has an interest rate of between 8% to 15% with the repayment period having a limit of 6 years.

Government SBA Loan Application details to provide

  1. Your personal background details
  2. CV and Business background
  3. Personal and Business/Financial Tax Returns
  4. Business Plan
  5. Financial Statements
  6. Legal Documents
  7. Collateral

5 Reasons your Government SBA Loan Application Can Be Rejected

    1. You have assets that you are refusing to use
    2. You used assets you don’t own in the application
    3. You have a poor credit rating
    4. You have defaulted in your FHA loan or student loan
    5. You have a shady past record.

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