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1. “What is an SBA Loan?” The Small Business Administration (SBA) makes loans available through participating lenders to eligible small businesses on Competitive and favorable terms. The SBA offers these loans because it recognizes the importance of our nation’s small businesses in society.

2. “Why use an SBA loan?” SBA loans offer competitive rates and longer terms, no points, no balloon payments, and no pre-payment penalties. Many business owners find cash flow to be a major concern. For them an SBA guaranteed loan may be the answer and possibly the best way of obtaining long term financing, and is the most popular, common loan program for start-up franchises. SBA guaranteed loan terms typically range from 7 to 25 years, fully amortized, depending on the purpose of the loan.

3. “What can I use an SBA loan for?”
Here are some of the most common uses of SBA loans:

• Purchasing or expanding real estate
• Buying a business or franchise
• Purchasing machinery and equipment
• Leasehold improvements
• Refinancing certain existing business debt
• Working capital in conjunction with the above

4. “Who is Eligible?” Most for-profit small businesses are eligible for an SBA loan. These include manufacturing, wholesale, retail and service businesses, as well as independent or franchise businesses.

5. “How much can I borrow?” SBA 7(a) loans are generally limited to $1 million per person, and have more than one loan at a time.

6. “What are the interest rates and fees?” Your actual rate will be determined by a number of factors including the project size, loan term and the borrower’s credit history, but the rate will never exceed The Wall Street Journal prime rate plus 2.75%, as specified by the SBA. There are no points on an SBA 7(a) loan, although there is a low packaging fee. There is also an SBA guarantee fee that can be as low as 1.00% of the amount borrowed and it varies depending on the size of the loan. This guarantee fee can be financed as part of the loan and is paid upon loan closing.

7. “Who can qualify for an SBA Loan?” A business must be independently owned and operated for profit. It must not be dominant in its field, and must meet certain criteria in terms of size, number of employees, and annual sales. Loans cannot be made to “speculative” businesses, media businesses, or businesses engaged in gambling activities.

8. “What is considered a small business?” More than 90% of the nation’s companies are classified as “small” by the SBA size standards, with limitations on dollar volume and number of employees set according to industry. Virtually every type of business qualifies for an SBA Guaranteed Loan.

9. “Do not have to be a minority to get an SBA Loan?” The U. S. Government does not discriminate against anybody. This myth dates back to the days when the SBA used to make “direct loans” to minorities in order to help the nation’s minority business communities. This program has long been abandoned and replaced with the current “Guaranteed Loan Program” which has been very successful in helping all small business owners, without regard to color and race. Under the Guaranteed Loan Program, if a bank approves a loan and the applicant qualifies under the SBA Guidelines, the SBA will guarantee the loan to the bank. Note that the SBA does not fund these loans, but guarantees between 75-80% of the full loan amount to the bank, while it is the bank that actually lends the money.


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