DON'T FORGET THE SBA

For Many New Product Developers and Business Owners, Help is Available From the Small Business Administration.

By Ken Tarlow

The Small Business Administration (SBA) is the largest source of long-term small business financing in the nation. SBA loans have helped thousands of small companies get started, expand, and prosper. In order to determine whether you qualify or if an SBA business loan best suits your financing needs, please read the following information carefully. If you have further questions, please contact your banker or an SBA loan officer:

GUARANTY LOANS

Loans are usually made by private lenders and a percentage of the loan is guaranteed by the SBA. A loan application is submitted to a lender that participates in the SBA loan guaranty program. It must meet the SBA eligibility and credit requirements as well as all requirements of the lender.

If the application is approved by the lender, it is then submitted to the SBA for approval. The SBA usually makes a credit decision on loans within ten working days.

BASIC TERMS AND CONDITIONS

While there is no maximum loan that can be obtained through the guaranty program, the maximum amount that the SBA can guarantee is $750,000. The SBA guarantees a percentage of the loan amount to the lender and there is a two percent fee on the guaranteed amount.

The average loan made under this program is approximately $210,000. While the SBA does not set minimum loan amounts, many lenders will not make loans below $50,000 and few lenders will consider loans below $25,000.

USE OF PROCEEDS

The loan may be used for a variety of business purposes, including working capital, inventory, machinery and equipment, leasehold improvements and the acquisition or construction of commercial business property. The maturity of the loan is dependent on the use of the loan proceeds and may vary from five to seven years for working capital, ten years for lender and borrower. Rates are variable and may not exceed 2.75 percent over the New York prime rate. 

HOW MUCH MONEY DO YOU NEED TO QUALIFY?

The borrower's capital contribution generally must be one-third of the total project cost for business loans.

HOW LONG WILL IT TAKE?

A credit decision on a complete loan package is usually made within 10 working days after it is received by the SBA, not including bank processing time. This assures that the borrower and lender have provided all the necessary information.

HOW TO APPLY

Applications may be obtained from participating lenders. Generally, documentation is required as follows:

* A current profit and loss statement and balance sheet for an existing business or a proforma statement for new businesses. You must provide a realistic projected cash flow and profit/loss statement for one year (monthly breakdown).

* A current personal financial statement of the proprietor or each partner or stockholder owning 20 percent or more of the company.

* Itemized use of the proceeds.

* Collateral with an estimate of current market value and liens against the collateral.

* A business plan, including resumes of the principals.

* A schedule of business debts, aging of accounts receivable and accounts payable.

* Personal and business tax returns for the past three years.

* Copy of lease (if property is to be leased).

* Any contracts or agreements pertinent to the applicant.

For further information on available services, contact your local SBA office or visit the SBA website online at: www.sba.gov

The above article was excerpted from Tarlow's MIND TO MONEY, a cassette tape/workbook package that can help you develop a new product from the idea stage to the marketplace. MIND TO MONEY may be ordered from the Dream Merchant at $59.95 plus $4.95 CA sales tax and$5 shipping and handling ($69.90 total). Send orders to the Dream Merchant, 2309 Torrance Blvd., Suite 104, Torrance, CA 90501.

Previous	Index		Idea Help	Next