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How SBA Operate

SBA Small Business LoanWhat is an SBA?

The U.S. Small Business Administration, an agency of the Federal Government, provides loan guarantees to banks and other lenders. These guarantees reduce the amount of risk to the lender and thereby increase the amount of money available to small business.

What interest rate is used?

Most SBA are a variable rate based on the Wall Street Journal Prime Rate Plus a margin that depends upon the size and type of the loan, as well as the borrower’s credit standing. The interest rate for each loan is determined at the time it is approved by the lender.

Some SBA financing arrangements, such as the “7A” program and the” 504” program, are made up of different interest rates.

Can SBA financing be used to purchase land?

Yes. If the property will be used for business purposes, now or in the near future.

Can Small Business Loan financing be used for construction?

Yes. As long as the business will occupy at least 67% of the total building size. This construction loan will be interest only during the construction period and will convert to a permanent 25 year, fully amortized loan at the end of construction.

Who can qualify for an SBA?

A business must be independently owned and operated for profit. It must not be dominant in its field, and must meet certain criteria in term of size, number of employees, and annual sales. It cannot be made to speculative business, media business, or business engaged in gambling activities.

How does the SBA program work?

Lender provides the actual loan to the borrower. The SBA guarantees a portion of the loan (between 50%_85% depending on the program) acting much like a co-signer. This helps lenders be more comfortable with a loan that they might otherwise not approve, such as a loan For a start up, or a borrower that has less collateral than a bank requires.