Obtaining an SBA Loan for Your Company

Although the SBA (Small Business Administration) doesn’t directly lend money to owners of small companies, it does create loan guidelines for general lenders, community development organizations and micro-lending institutions that partner with it. The SBA helps reduce the risks for these lenders as they select the most qualified small businesses seeking help.

SBA-guaranteed loans are designed to offer competitive fees and rates and applicants are usually offered helpful counseling during the application process.

You’ll know when you’ve found the best loan offer since it will provide you with one or more of the following benefits.

  • The need for little or no collateral
  • Flexible overhead requirements
  • Lower down payments

Although the stated reasons for securing a loan can vary, many companies seek loans to help them secure long-term fixed assets and basic funds to run their businesses. However, under certain circumstances, the amount you can borrow may be restricted based on how your company intends to use the money.

SBA loan funds are often sought for the following types of working capital and fixed assets

  • Revolving credit
  • Seasonal financing
  • Export loans
  • The refinancing of current business debt
  • Machinery
  • Real estate
  • Construction
  • Equipment
  • Remodeling

What types of eligibility requirements must be met to obtain a loan?

Lenders often first inquire about the parties holding ownership interests in the company, how it generates income and where it conducts business. They also inquire about the basic size of your business – based on the company’s number of employees, average annual receipts and other factors.

Of course, your ability to repay the loan is of keen interest to lenders, along with having a very secure business purpose. While a strong credit rating is highly desirable for obtaining loans, if you’re running a new company, certain start-up funds may still be made available to you.

Keep in mind that all lenders are entitled to establish their own, supplemental eligibility requirements for making an SBA-guaranteed loan – and they’re also entitled to ask about the following information.

  • If your company is properly registered and currently eligible to do business;
  • Whether your business is currently operating in the United States or one or more of its territories;
  • If you can easily document the time and money each business partner has already invested in the company;
  • If you can provide evidence of any recent, unsuccessful efforts to secure a non-SBA loan.

Can small companies operating as exporters of goods obtain loans from the SBA?

The SBA does try to help such companies. However, you’ll need to usually start your search for a possible lender by first contacting an SBA International Trade Specialist or the group’s Office of International Trade. Exporters often need help securing additional funds to cover their daily operating expenses, placing advance orders with suppliers and debt refinancing.

How should my company go about looking for a specific SBA-affiliated lender?

You’ll first need to spend five to ten minutes answering questions on the SBA website concerning your company’s present needs. You should then receive an email matching you to one or more interested lenders. It is then up to you to contact each potential lender to discuss possible rates, fees and other factors involved with structuring a loan. You’ll then need to submit applications and wait to receive responses.

If you do not receive any offers that you believe are favorable or viable, you can ask to speak to an SBA counselor again to see if there’s a better way for your company to try and secure the type of loan you need.

Please feel free to contact one of our Murray Lobb attorneys so we can provide you with further advice about obtaining business loans through SBA programs, private banks — or other reputable sources.

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