Small Business Loans Via the SBA

Is it a small business?

Oxygen. Money. Done! Any questions?

If you are considering getting a small business loan through the Small Business Administration, you first need to know if your business even qualifies as a small business. When the Administration was set up Congress had to put in place what type of small businesses, including what a small business was classified as, could apply for and obtain this type of loan. To do this, they went to industry and defined what qualified as a small business. Actual numbers were placed on the values of what could be considered a small business and these numbers have changed somewhat over time.

Under the Small Business Act, a small business is one that is independently owned and operated. In addition to this, the business should not be dominant in its field, and the business must qualify based on the size limitations which are in place for that business type, depending on what the business size is, in comparison to others in the field. To find out if your business qualifies as a small business for the purpose of applying for a small business loan through the SBA, you’ll have to visit their website and access the Small Business Size Standards table that is published there.

 

Business size factors

There are two ways in which the SBA determines if your small business actually meets these small business standards. To do this, they reference the “size standard” which is what defines the particular businesses as they compare to others in the industry. This standard is set and modified over time as necessary, but the two ways in which they determine if a business is a small business, is to consider one or both of the following methods:

  1. The number of employees that you have working for you is one factor.
  2. The average of receipts the business takes in per year is the other factor.

When considering these two criteria, the SBA determines if a small business will qualify for small business loans pursuant their guidelines. You may think that your business is the right type, but it may not be, so if you are considering this type of loan, the first thing you need to do is determine if your business is eligible based on your industry’s standard size. This will play a significant role in your ability to obtain a loan through the Small Business Administration. These rules may not be the same for other lenders in the small business loan market place.

How SBA may help

Keep in mind that SBA is a government agency, funded through the Executive Branch of the Federal Government; and as long as you don’t mind dealing with a governmental agency, then you can use it as a resource to you for all that you need in getting your business up and running. The SBA can be used as a guide for helping and funding new small businesses. The traps out there that promise to help you to get thousands of dollars for your business aren’t completely untrue, but you can secure quite a bit of help through this agency while avoiding the added expenses that may be incurred through a private company.

The Small Business Administration provides help in several areas. They offer help for those that need help in management of their business; and the agency also provide for advocacy, procurement and financial assistance for the business owner. In the area of financial help and support, the SBA provides several programs including investment programs, disaster loan programs, bonding for contractors and business loan programs. One of these may meet the needs of your business.

Backed by the SBA

The Business Loan Programs offered through the SBA are some of the best sources for funds. But it is important to understand that, while the SBA doesn’t actually lend you the funds, they do establish guidelines to those lenders that will. This comes from a variety of sources including standard lenders, community development organizations some entities known micro-lending institutions. To provide you with help, the the SBA set guidelines for these lenders to follow, but also provide some backing to you so that – in case you don’t make payment on your loan – they will cover some of the loan for you although, legally, you will still need to pay it back. This helps to reduce your risk level and therefore lower the cost of borrowing money.

Why should you consider getting help for your small business loan needs through the Small Business Administration? The answer is, because the SBA provides backing of your loan by the federal government, providing you a lot more ability to obtain a loan through any of the lenders that work with that agency which provides to you the added benefit of a less costly loan in the long run. Perhaps the most important feature of a SBA loan is the “full faith and credit backing of the Federal Government” which makes you a safer risk to business loan lenders. The same loan through another lender (not backed by the SBA) is likely to cost you more.