If you have a small business the SBA could be the only place that you will be able to find funding, it’s the only game in town for business loans like the 7a and Microloan. This is kind of like, when in Rome, type of situation for a small business owner. A bank lending to the business community without the SBA loan guarantee is becoming a memory of the distant past. Business owners, if they haven’t already, are finding out that the local bank that they have been borrowing money from for years will not even talk to them now. This trend will continue for years to come. The reality is that a small business owner only has one place to go for funding, the SBA.
The good news is that congress has past a law, just before the year’s end, that funds the 90% loan guarantee and will most likely last until Feb 28th before it runs out of funds. Although this is temporary, funding originally came from the stimulus package that has run out of funds; some kind of bill will probably be past that will carry us through until years end.
On Dec 21st the defense bill was pasted into law that totals 636 billion dollars, $125 million dollars of that will be set aside to give guarantee loans for the 7a, the flagship program of the SBA, and the 504 loan program. This will also include the up and coming Microloan SBA program. The SBA’s Microloan is for small businesses that need a smaller amount of funds, and would like a shorted term. Most businesses have less than 5 employees and do not need the larger loans that the 7a is used for. The SBA has a program for just about any small business need.
CEO and President of National Associations of Government Guarantee Lenders, Tony Wilkinson, as reported by the Austin Business Journal said “The market for conventional loans to small businesses probably won’t return to anything close to normal until 2011” the SBA “needs to be stepping up and filling that void,” Given the constraints on bank lending, “this is pretty much the only game in town.”
Now that you know that the SBA loan is the only game in town, how do you get money from them? Well, you don’t. The SBA loan is just a guarantee, not cold hard cash. They have no money to lend. The way that it works is you contact a bank and ask them if they fund loans through the SBA loan guarantee program. However the SBA has many different types of loans and it is always a good idea to shop around and talk to as many lenders as you can. Learn about the different types and talk to other businesses that have received SBA loans in order to better understand the process and the pitfalls.
If you only have one game in town wouldn’t it be a good idea to learn how to play?
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