SBA Startup Loan

For the entrepreneur looking to start a small business, an SBA startup loan is a way to gain quick access to the money necessary for the initial costs of the enterprise.

The SBA (Small Business Administration) offers two different SBA startup loans to prospective business owners-but that's not all. This governmental agency also offers technical advice and, to qualifying companies, an analysis and sanction to take to commercial lending companies.

The first type of SBA startup loan program is the Basic 7(a) Loan Guaranty, which is the primary program of the SBA. Essentially, they offer a guaranty for startups with sound business plans. The loan is obtained from commercial lending institutions with the SBA providing the principal. This loan can be used for a variety of purposes, including the purchase of equipment, furniture, fixtures, construction, and as working capital. This is the SBA's most flexible loan program, and the amount of money available depends greatly on the individual case.

The second type of SBA startup loan is the 7(m) "microloan," which offers startups of up to $35,000 on a short term basis. This money may be used to buy supplies, machinery, furniture, fixtures, and inventory, but not for real estate. In the case of this microloan, the SBA first grants the loan to an intermediary, usually a nonprofit with experience assisting small businesses and in lending money. This nonprofit then grants the loan to the potential small business owner. This loan is only available in selected areas.

One other SBA startup service is the Loan Prequalification Program. This program offers prospective small business owners the opportunity to have their credit, experience and character analyzed and potentially sanctioned by the SBA before going to a commercial lending institution to obtain a loan. This service is only offered if the loan requested is of a value under $250,000.

The SBA is a great place to start if you are looking to create a startup business. From offering and guaranteeing loans to helping with technical expertise and offering a potentially loan-granting reference, the SBA can be of great help to the prospective small business owner.