According to federal government research, small businesses provide
about 75% of the net new jobs added to America's economy. They also employ fully one-half of America's private
sector workforce. In addition, 99.7% of all employers in the U.S. are small business owners. These statistics make
a strong case for the existence of a federal organization dedicated to the promotion and proliferation of small
businesses in this country.
In 1953 the United States government established the Small
Business Administration (SBA) as a way of assisting entrepreneurs in forming successful small businesses through
government guaranteed loans. While the SBA itself doesn't make many small-business loans, its primary function is
to guarantee the small-business loans made by private lenders.
Most SBA loans are secured through any one of the SBA's many
licensed partners nationwide. Besides establishing lending guidelines for their partners, the SBA also ensures
reasonable loan terms by guaranteeing major portions of the loan in the event of a borrower default. Because of the
decreased liability provided by the SBA, the lender is able to offer better interest rates and options to
businesses in the early stages of development.
Before we get too excited about the potential benefits of an SBA
loan, it may be a good idea to first talk about who can potentially qualify. The size of your company obviously
plays a large role in securing an SBA loan; after all, this is about 'small business'.
If you run a manufacturing company, its possible to have up to
1,500 employees working for you and still qualify for an SBA loan. On the other hand, depending on the type of
manufacturing you do, it may be more likely that you'll be limited to 500 employees in order to qualify for loan
For some industries, the SBA lender may look at your company's
average revenue. For example, if you run a wholesale or retail business, your average annual sales for the past
three years cannot exceed $6 million to $29 million, depending on the type of business you own. Construction
companies need to fall into the $12 million to $28.5 million range. Basically, if you make too much, you're
considered too 'big' to need an SBA loan. It's also very important that you're running an independently owned
for-profit organization if you are considering SBA loans.
If you still qualify keep reading.
When beginning the SBA loan application process, your lender will
require you to have some specific information ready. The first document you'll need is your business profile; this
simply describes the type of business you run, your annual sales revenue, the number of people you currently
employ, and how long you've been in business. You will also need to provide a loan request. This is a description
of how money you need and how you plan to spend it. As with any loan, you will need to provide collateral. Be
prepared to explain how you plan to secure the loan.
The most important information you will need to provide is the
business's financial statements for the past three years. These include: balance statement, income statement, and
the statement of cash flows. As the owner of the business, you will need to provide not only your personal
financial statements, but also the financial statements of any other individuals that hold 20% or more equity in
the company. Most lenders will also ask for personal tax returns for the last three years.
In the next portion of this article, 'SBA Loan: Options, Benefits,
and Lenders', we will further examine what kinds of loan options are available, and for what kinds of businesses
they are most advantageous. Lastly, we will discuss different types of SBA lenders.