Where to Go When the Bank Says, "No"

With the bank crisis we’re currently facing, far too many business owners are at the mercy of others when it comes to business financing. Here’s one way small business owners can win at the high stakes games of business financing.

For most small businesses, a Small Business Administration (SBA) loan is the most advantageous financing available. SBA loans offer lower down-payments and longer re-payment terms than many other financing options. They are smart, affordable solutions for small businesses looking to grow their business. If your efforts to find money have been met with a resounding “No” from banks and commercial lenders, you will find these lenders will usually say “Yes” if the SBA guarantees the loan.

SBA eligibility requirements vary from loan program to loan program, but you will find the requirements are broad and designed to accommodate a diverse number of small business financing needs. You will find answers to most of your questions regarding SBA size standards at www.sba.gov/size/part121sects.html.

The most-used SBA loan program is the 7a program. The 7a loans may be for short-term and/or long-term financing needs. The maximum loan amount is 2 million. These loans can be used for most business purposes, including commercial real estate, construction or renovation for owner-users, business acquisition and start-up, franchise refinancing, refinancing for existing debt, equipment purchases, working capital and inventory.

Re-payment ability from the cash flow of the business is a primary consideration in the SBA loan decision process, but good character, management capability, collateral and owner's equity contribution are also important considerations. Sufficient assets must be pledged to adequately secure the loan to the extent they are available. The collateral may be in the form of business assets (receivables, inventory, equipment, real property, etc.) or may be personal assets (deposits, real property, etc.).

Most banks participate in the 7a loan program. The borrower works with the lender, who arranges with the SBA for a guarantee of 75 to 85 percent. The SBA processing time generally takes 8-15 working days upon receipt of your application from the bank.