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SBA 7(a) Loan

SBA 7(a) Loan Program Basics

The Small Business Administration 7(a) guarantee loan program is the SBA’s most popular. This loan is for the small business owner who unable to obtain a loan with a conventional bank. This type of loan is widely misunderstood by most first time applicants and veteran small business owners alike. The basic concept of the 7(a) loan is that a commercial bank lends money to a small business owner, and up to 90 percent of the loan is guaranteed through the SBA 7a loan program. This does not mean that the borrower is not 100% libel for repayment. The bank receives the guarantee, not the borrower.  You can get more information about the SBA Loans by starting with our home page.

SBA 7(a) Loan | Less risk to the bank

It is less risk to the participating lending institution if the SBA grants the loan. However, it is still the banks decision to lend the money. If the lending institution has determined that they will not fund the loan, the Small Business Administration cannot force the lender to make funds available. The SBA does not have any money to lend.

SBA 7(a) Loan | Not all participating banks are alike

It is important to understand that every participating bank and non-bank have internal lending qualifications. Every participating lender is different. Even if you are turned down by one bank, it does not mean that you cannot get an SBA 7a loan. Many lenders have internal quotas they need to meet, while other banks are more knowledgeable in working with the SBA 7a loan program. Each bank has its own terms and the small business owner needs to negotiate with the participating lending institution for the terms and rates associated with the SBA 7a loan.

Just as with any mortgage, it is the best practice to shop for optimum lender terms and rates for your situation.

SBA 7(a) Loan | Education is the key

Although the SBA’s website spells out in great detail the SBA loan program, the laws are constantly changing. The best way to insure a good experience is to educate yourself with as much information as possible before entering into the loan process. The first thing to keep in mind is that a commercial lender will first want to determine if it is able to fund the loan for your small business without the guarantee of an SBA loan. If the lender feels that it is necessary to have the funds guaranteed through the SBA 7a loan program then the SBA should be there to help. The best way to alleviate the stress and pressure is to have more than one lender working on your loan.

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