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SBA 7a Loan Guarantee

The SBA loan’s web site spells out a guarantee regarding the 7a loan.  Lenders, Banks and Businesses Receive 90% Guarantee under the SBA 7a loan guarantee program. It indicates that a loan structured to meet the SBA’s requirements, and the SBA’s standards, in turn will be loan guaranteed to the lender. In typical government fashion, this is only the simple explanation for the 7a loan guarantee. The real power behind this is that the participating lending institution has the ability to receive a guarantee up to 90 percent. If a small business owner defaults on the loan, the lender will still receive payment on the money owed. Think about that for a moment. The risk for the bank is only 10%. Who wouldn’t want that kind of reward for helping out the small business?

Take advantage now and apply for SBA loans, even in the worst case scenario, you will still have a blueprint on exactly what you should to do to structure your business to qualify.

What Is The Guarantee?

In the short version, you must meet the requirements of a SBA 7a loan structure. The SBA states its eligibility and credit standards. The following is a brief outline of information the banks will receive:

  • 85% of the loan amount (this has been raised to 90%)
  • Export loan working capital is at least 50%, and up to 1 million (subject to change)

What You Need to Know:

This is the best time to get a SBA 7a loan. The guarantee has been raised to 90% and banks that have money to lend looking for borrowers. Most banks sold the loans on the secondary market to free up money in order to make more loans. The SBA 7a guarantee was sold with the loan. This practice has come to an end. When capital dried up on the secondary market many banks looked to the SBA 7a loan guarantee as a way to hold onto those loans and service them.  In order to receive a guarantee lenders have to do underwrite the according to SBA standards. However, With all the bad news for banks in the residential market this is a bright spot for them and many want and need to expand lending to small business under the SBA 7a loan guarantee program.

SBA 7a Loan Guarantee | Putting It In Prospective

Obtaining a guarantee for a loan, to reduce the liability of a lending institution, has always been the driving factor in determining risk to the lender. If your business is less than perfect from a risk standpoint, then take advantage of the U.S. government’s SBA 7a loan guarantee. This could be the nearest a small business can get to a government bailout.

Go to the SBA 7a Loan center page to learn more.
To learn more about the SBA 7a loan application read this article.

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