Getting an SBA Loan: 5 Things You Need to Know
Getting a business loan is tough -- especially these days. But the Small Business Administration can still be a great lending partner. How to cut through the red tape and secure an SBA loan.
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In what was called "the 90 percent guarantee," the SBA guaranteed 90 cents on the dollar for each loan, instead of 75 cents, and waived the borrower's fee, "which could be as much as 3 percent," Reilly says. Meaning banks and business owners both had added incentive. And so SBA lending jumped -- until the the 90 percent guarantee ended in May. And now? In June, according to Reilly, lending dropped 74 percent.
Of course, it's still possible to get an SBA loan -- Reilly is the first to admit it -- and it can be a great way to infuse your company with cash. But how can you navigate the red tape and make sure all the effort pays off? Here are five things you need to know.
Know the lingo.
- The express program is aimed at getting you a loan as quickly as possible.
- The export loan program is for businesses that export their products.
- The rural lender advantage program is for businesses located in small communities far from metropolitan areas
- The special purpose loan programs are even more targeted -- designed to help a business that's been negatively affected by NAFTA, for example.
There are also microloan programs and disaster assistance loan programs and the 8(a) program, which is aimed at "socially disadvantaged individuals," according to one of the SBA's FAQ guides. Odds are, you'll be applying for the 7(a) program or perhaps an SBA 504 loan, which you'll want if you're using the loan for real estate or infrastructure, such as buying land or expanding your building.
Reilly seconds that, noting that she sees a lot of "shoebox accounting," and business owners like that don't get very far in the process before being told to go to the end of the line.
And in that documentation, "tell a good story," suggests John Reddish, president of Advent Management International, a strategy and growth consulting company based in Drexel Hill, Pa. (Reddish is also a longtime member of a loan committee for a local development agency that is a large producer of SBA loans.). That story, Reddish says, should give your lender a good feel about both your company and what you plan on using your loan for.