Being an entrepreneur is not an easy thing to do. It requires thought, planning, resources, and a lot of support. A rule of thumb says that it normally takes three years before a company breaks even. During that time, the company has to find ways to finance their company.
Small Business Administration (SBA) loans are one way to raise funds. SBA preferred lender banks can be found in Minneapolis, MN to help small businesses get funding for their expansion or operations.
An SBA loan is given to small businesses by lending banks and other financial institutions. It follows almost the same procedures as the regular loans. The SBA loans are so-called because these are guaranteed by the SBA. This allows banks the flexibility to offer these loans with flexible terms and low-interest rates. These can be used for equipment, capital expenditures as well as for additional capital.
Due to these advantages, it is advisable for a small business to apply for an SBA loan. Unfortunately, since the SBA itself will be guaranteeing the loan, there is a strict set of criteria for approving the loan. This makes it tough to get approved for an SBA Loan.
SBA 7(a) Program
The most popular SBA loan is the SBA 7(a). Like the other SBA loans, it is federally guaranteed for up to $5 million. The funds can be used as a working capital, for expansion and equipment purchases. It is processed through banks, credit unions, and other specialized lenders.
In this kind of loan, the borrower applies to an SBA accredited bank and is processed accordingly. The borrower should be registered as a business, and it should operate legally. It should also do business in the United States or its territories, with a real office address. The company has to have invested equity. That means that the owner has already invested his own time and money in the business. The company should also have tried to get funds from other lending institutions but failed.
The business owner should contact their nearest bank to learn more about applying for an SBA loan. It is one way to get a second chance when all other banks have rejected a small company’s loan application.