Small Business Administration Loans: A Venture For Business Entrepreneurs

By: Josh S. Brown|LRL Writer  

Before setting up a business one needs to understand the Small Business Administration Loans or SBA loans and the services that they provide. SBA is an agency of the federal government that works independently. It primarily provides assistance to entrepreneurs in four areas-advocacies, management, procurement and financial assistance. Among these the SBA loan program is a significant part of its financial assistance. This is an excellent source of funds for people desiring to start a small business and require financial aid in this regard. The SBA provides financial assistance and a wealth of other information to entrepreneurs.

Before finding out more about the financial aid provided by SBA, one should know that the Small Business Administration loans are provided by private agencies and not by SBA directly. SBA is a kind of financial guarantor and does not give any loan as such. This is mainly for those individual who are eager to start up their own business but are not eligible for conventional loans. This works out well for both the private lending agencies and the business entrepreneurs. In fact if a business can get a loan on reasonable terms from a bank or a similar source then the SBA may not guarantee a loan in that case.

There are three types of loan programs offered by the Small Business Administration loans.  They are the Loan Guarantee program, the Certified Development Company Program and the micro loan program. The Loan Guarantee Program is the primary loan program of the SBA and is best for start up companies and businesses that would otherwise be ineligible to get a normal loan from the bank and other lending channels. This is an extremely flexible loan program and works out best for beginners in this field. These loans are made on a guarantee basis and protect the lender against payment default.

First the applicant should be eligible for the loan. This depends on the size of business, the type of the business, the country of operation, availability of funds from other sources, the use of proceeds and the repayment terms and conditions. Some businesses require meeting some more eligibility criteria for a small business administration loan while some others are rendered ineligible due to their area of functioning. It is necessary that the applicant should have been turned down by a conventional loan giver, such as a bank. It is also mandatory to know that the loan cannot be used for any other purpose except the business applied for.
 
One cannot use this loan to pay back existing debts or use it for an existing business. Also this loan cannot be used to buy real estate, not even company premises or shops. There are certain other criteria which need to be fulfilled in order to be eligible for a small business administration loan. Basically the SBA is a venture to help out those business entrepreneurs who would otherwise be unable to get a loan sanction and start a business of their own. This feature makes it very reachable to small businesses that would otherwise be sidelined by other business giants vying for a business loan.

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