The Small Business Administration - What's Not to Love?

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The Small Business Administration (SBA) is an independent part of the United States Government and each and every small business owner in America should be aware of them. It is the part of government that knows no party affiliation and helps Americans start, build and grow their businesses.

The Government is not stupid.

They are aware of how many small business owners there are in America and how these people are paying a good portion of our country's taxes, or as they say, "We recognize that small business is critical to our economic recovery and strength, to building America's future, and to helping the United States compete in today's global marketplace." (https://www.sba.gov/about-sba/what-we-do/mission).

As a business owner, aspiring or existing, what's not to love?

If you are thinking of starting a business it will be markedly easier to start off with an SBA loan. Traditional, FDIC-insured banks (Chase, Wells Fargo, Bank of America), will not generally lend to businesses with less than three years of tax returns, or three years in business. But fear not, the FDIC-insured banks love the SBA too and they are quick to use the SBA on any loan. And the reason is quite simple...

Let's break it down using a rudimentary example:

When a business owner asks for a $500,000 commercial real estate loan for his business, the deal is generally structured like this:

  1. Down payment = 20% (Borrower's responsibility)
  2. U.S Government = 65%
  3. Bank = 15%

The banks love this, as you can see, because their exposure is only 15% percent of the total loan amount. Yes, they have to handle the processing of the loan (the paperwork), but the U.S. government takes the bulk of the risk because they are "backing" the loan under the SBA's mantra of stimulating the economy. We, Americans, should be taking full advantage of this amazing program. And it is amazing. The search and comparison tool, Magilla Loans, gives borrowers the ability to anonymously compare both SBA and non-SBA loan options.

SBA loans are broken into two basic types:

  1. 7A = working capital (cash) or to improve the building you lease
  2. 504 = to purchase a building, ground-up construction, renovations to a building you own, or the purchase of equipment

There are those detractors of the SBA loan program, generally complaining about its voluminous paperwork. However, I have done both SBA and traditional bank loans and, in my opinion, they are not markedly different in terms of their paperwork. The timing to receive funds may take a little longer, but not always.

Now, don't get me wrong, you still must meet the lending criteria they set forth and, should you fail to repay your loan, the Government knows where you live, but, to me, this is one of the greatest benefits of being an American citizen so when thinking of obtaining a loan for your business, think the Small Business Administration because...

What's not to love?

This post originally appeared on The Whole Magilla and was written by Chris Meyer, co-founder of MagillaLoans.com.

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