Small businesses often need financial support to start a new business or run the existing business successfully. If you require money to buy equipment and promote your service or pay the bills, then you must acquire a small business loan. The Small Business Administration of United States offers special loans to the businesses that do not fulfill the criteria required to get funds from conventional funding agencies. The objective is to support the development of small business and improve the financial situation of the entire nation. These loans offer flexible terms such as fixed rates of interest, extended repayment time and so on. Here are a few steps that you must follow to qualify for the SBA small business loan.
The first step is to gather knowledge of SBA loans. If you wish to buy commercial property or equipment, you can apply for 504 loans. Under this financial program, you cannot use the money to repay debt and you have to contribute at least ten percent down payment. The amount of Microloan loan provided by SBA is less than 34,000 dollars and you cannot use it for debt repayment or property purchase. Unlike 504 programs, you do not have to make an upfront investment.
SBA 7 (a) program is the right option for the business that fails to qualify for Microloans or 504 programs. The money borrowed from this program is used for business expenses such as debt and real estate property purchase.
Know About the Eligibility Criteria
If you want an amount of money that is less than two million dollars, then you can apply for this type of loan. Unlike the conventional financial organizations, SBA does not set stringent terms for loan acquittal. However, these funds are not available for the businesses, who are involved in gambling or other illegal activities. Plus, these funds are used for business purposes and they are not used to repay delinquent taxes, refinance debt or other similar activities.
These funds are not available to the businesses that have alternative financial sources. This signifies that the business owner or even the partners, who control twenty percent or even more of the company’s funds, should use the assets or savings to finance the company before applying for the financial support from the SBA.
Prepare for application process
The final step is to prepare an effective business plan and submit it for approval. The US Small Business Administration and affiliated moneylenders review the plans as well as other materials. These applications are assessed on the ability of the business for loan repayment, credit history as well as the amount of an owner’s investment in the business.
It is important to remember that loans are not acquired directly from the SBA. They set the rules as well as regulations that are strictly followed by different banks and lenders that offer these funds under the approval of the SBA. It offers diverse funds that are developed to cater to diverse financial scenarios. Therefore, it is vital for you to select the right financial option and also an appropriate provider based on your requirement.