How the Small Business Administration Address Special Needs
A Home Business Article Contributed by G. Uma Bennett
How the Small Business Administration Addresses Special Needs
The Small Business Administration created the Pre-qualified Loan Program to target prospective business from many categories including: low-moderate income, new market customers, disabled, new and emerging businesses, veterans, exporters and rural communities. The main advantage of this program is that it allows the borrower to go directly to the agency for approval with the assistance of a non-profit Small Business Development Center, with the bank becoming involved only after the Small Business Administration has granted approval, which means the bank is more likely to consider the request.
Get the Inside Track to the Small Business Administration
Knowing what is required of you when you are dealing with the Small Business Administration will ease your application process. Similar to the Low Documentation program, the Pre-qualified Loan Program focuses primarily on the credit history, character, and experience of the borrower. However there are no stated minimum equity or collateral requirements. The maximum loan amount in the program is $250, 000. The bank receives a guaranty from the SBA for up to 85 percent on loans up to $150, 000 and up to 75 percent on loans between $150, 000 and $250, 000.
Requirements of Funding from the Small Business Administration
In regards to economic growth, the Small Business Administration has made the primary focus of the Pre-Qualified Loan to open the path of business ownership to low-moderate income borrowers, those whose annual income is 80% or less than the median income for the region where the borrower is located. In addition, a small business must have annual sales not exceeding $5 million and employ fewer than 100 people. These loans come with the same restrictions for maximum interest rates, fees, terms, and uses of loan proceeds as the other standard guaranteed loan programs.
The Small Business Administration Develops New Methods for Funding
The Small Business Administration developed the Micro Loan Program in the early 1990's. Using non-profit intermediaries, such as local Small Business Development Centers to provide counseling, application processing assistance and eventual financing to local small businesses. Through this program, the SBA guarantees an average of 1, 500 Micro Loans each year and has helped meet a niche for truly small businesses unable to obtain credit from banks, who not considered bankable, due to poor credit history or inability to meet the strict guidelines for loans.
Additional Sources to Funding from the Small Business Administration
While the Small Business Administration is certainly the most well-known, it is not the only source for micro small business loans. The SBA success have prompted many local and state governments to begin similar loan programs, which are ideal for the business owner who needs up to $25, 000 to start or sustain the venture. Many of these micro loan programs are made up of a combination of banks, corporations, local foundations, city and county governments.
Together they provide small loans of $5, 000 to $25, 000 to fledgling businesses, with the average loan at $7, 500 with a two to three year repayment term.
