Apply for an SBA Loan

Good financing is a key component to any successful small business. The most brilliant product idea or high quality service can't make a company flourish if they lack the right amount of money at the right time. Inadequate financing during key developmental stages is a common reason for businesses to fail.

Small businesses are especially vulnerable to this problem. They may lack the reserve resources or funding connections to see them through the hard times that often accompany a company's push to the next level. Too many good companies-with bright futures that may have included years of successful business-fall by the wayside for the simple reason that they can't purchase the equipment or real estate they need to be competitive and keep their business growing.

The Small Business Administration (SBA) sets specific guidelines regarding finance. These include rules relating to collateral and interest, as well as timeframes for repayment. Lenders, however, are able to operate their businesses to their own discretion, within the SBA's established rules. When thinking about applying for an SBA loan, it is important to understand that a lending company is responsible for approving your loan. If a lender thinks your business has promise, but is anxious carrying out an unsecured loan-a loan where the borrower cannot produce adequate collateral-the lender will help you apply for SBA backing for your loan.

When companies apply for an SBA loan and are successful in their application, the SBA shares the risk lenders take when loaning to small businesses. The idea behind the SBA's participation in the loan process is that the reduced risk to lenders will free up more money for qualified, established small businesses to turn big dreams into big profits. The SBA, however, does not actually loan any money at all to any type of small business. Their role is purely to make local lenders more comfortable financing small local businesses with proven success and a solid plan for the future of their company.

The SBA is aware that even more dangerous to successful businesses than lack of comfortable financing is poor management. In order to make sure that the federal taxpayer money spent helping secure loans for small businesses doesn't go to waste, the SBA places special scrutiny on a business' credit and future business plans. The SBA likes to see good collateral in place, though their policy on this point is not as hard-line as that of nearly any other guarantor. They attempt-when possible-to take a big picture view of an applicant's business and personal history. This generous approach to business financing makes the extra steps involved in securing SBA backing well worth the trouble for any small business ready to grow.