Small Business Loans for Beginners

Small businesses are the backbone of the US economy. The US government understands this fact, and that is why they created the Small Business Administration (SBA). In addition to providing a wealth of information about starting and running a business, the SBA administrates several loan programs for those seeking capital. An SBA loan is not money borrowed directly from the government, but rather the department backs loans made through banks to business owners. The loan guarantor role of the SBA serves the purpose of lowering the risk involved for banks making loans to small businesses and allows them to charge lower interest rates. For small business owners, this is very desirable since many would have trouble securing any other source of financing.

Getting an SBA loan is not an automatic source of financing. In addition to finding the right lending program, the borrower must fill out the paperwork thoroughly and meet some basic requirements. However, the purpose of an SBA loan is to make the dream of owning a business reality to those who may otherwise not be able to find another way. Therefore, the process is simple, straightforward and designed not to create a lot of extra burden on the borrower. The entrepreneur will usually have to be financially stable with good personal credit to apply for most loans in the program. Also, the applicant must present a solid written business plan showing how the money will be used to start, improve or expand the business.

There is an SBA loan for many different situations and types of businesses. The planners at the SBA look at current economic conditions and decide on programs that they think would best help the highest number of small business owners. They make loans available for those in need of working capital, major fixed asset purchases, disaster recovery, seasonal demands and export assistance to name a few. Loans requiring no collateral are also available for smaller amounts. In short, the SBA tries to assist as many small businesses as they can to stay strong and grow.

To get the application process started, the borrower need look no farther than the nearest participating bank or SBA office. Banks usually enjoy making these loans since they know that the money they lend will be repaid one way or another. This setup means they have less risk involved, and for a bank, the less risk involved, the better. Banks can also keep lending fees and interest rates lower when they know the government will repay the loan if the business owner defaults. The SBA helps to create a diverse and vibrant small business community, strengthen the economy and put millions of Americans to work.

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