Saturday, August 13, 2011

How can you get a SBA loan

Below is a test to see how much you might or might not know about SBA loan programs.


See how you do on this SBA (Small Business Association) Test

(True or False)

1. As you can imagine as with all government programs, there is a lot of red tape, paperwork, and time involved in obtaining an SBA loan especially compared to regular bank loans.

2. SBA loans are lower-interest than most normal business loans.

3. You must be turned down by a bank or credit union before you can obtain an SBA loan.

4. A SBA loan must be fully secured by collateral or it will be declined.

5. SBA business loans are designed to be longer term than traditional loans and do not allow “balloon” or other such call type features.

6. The term of the loan (length of the loan) is actually more important than the interest rate, especially concerning the impact on the cash flow of the business.

7. If I have an SBA loan, it guarantees my business will not fail.

8. Any bank or credit union can help me with an SBA loan.


Answers


1. False. Most SBA loans require about the same amount of paperwork as a regular bank loan. They will require collateral, good credit and probably personal guarantee’s, much the same as a regular bank loan. Banks like to give SBA loans because much of the loan amount is protected and if defaulted on will be repaid by the government.

2. False. Generally they are the same as regular bank or credit union loan interest rates. The SBA do not actually determine the interest rate on each loan and one particular program, the 504 loan program, offers a lower than market rate but many cannot qualify for this loan. Generally the interest rate will be the same or close to the normal rate charged by the bank or credit union.

3. False. Most SBA loans are just bank or credit union loans but are guaranteed by the SBA, therefore they must follow those standards set by the SBA.

4. False. Just like a regular bank or credit union loan, they do not need to be fully collateralized. Depending on the credit worthiness of the individual, 100% collateral aren’t always needed. If the finance company can get a person 100% of it collateralized, they will be happy to take it, but it isn’t always necessary.

5. True. There are stipulations on most SBA loans, so be aware of those stipulations and make sure you can live with them. Sometimes other non-SBA loans are better for a borrower.

6. True. Most of the time a borrower loan payment can be more important than the interest rate a person pays. A longer term of a loan can reduce the amount of the monthly payment and many times is a better deal. Cash flow for a business is very important to success or failure.

7. False. No one can or will guarantee the success or failure of a business. Having an SBA will give you some comfort because they require the bank and the borrower to follow proven steps in researching a business.

8. False. Only those financial institutions who have been approved by the SBA can give these type of loans.

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