SBA Programs
Ask not what your business can do for your country, ask what your country's Small Business Administration can do for your business!
The SBA off various types of loans to small businesses in the retail sector, manufacturing, wholesaling, construction, service and about every other type of industry. To get access to these loans, a small business has to meet certain criteria. For example, in each industry, there are set size requirements that a business cannot exceed. And the business must be independently owned and operated and not possess dominance in its market or field. The SBA also promulgates its own more detailed standards in addition to these general statutory ones.
Section 7(a) Loan Guarantees
Section 7(a) loans are the ``standard" SBA loan. 7(a) loans are the original SBA loans which can be used for business construction, expansion, or conversion; purchase of machinery, equipment, facilities, supplies, or materials; and/or for working capital.
The good news is that most small businesses are eligible for SBA loans, but these are not (generally) direct loans from the SBA. Instead, the SBA acts a partial guarantor for loans that your small business obtains from private lenders (banks or other such lenders). For loans of $155,000 or less, the SBA will guarantee up to ninety percent (90%) of the loan total. For loans over $155,000, the SBA will guarantee up to 85%. Maturity on these loans can be up to twenty-five years The SBA will guarantee a maximum of $425,000 on any loan. The average loan guarantee is about $175,000 dollars and the average maturity length is eight years.
The guaranteed business loan program has been privatized and turned into a two-tiered program. One program is the Certified Lenders' Program (CLP). In the CLP, the SBA (alphabet soup!) relies on a group of lenders to process a business' loan application and its creditworthiness. After processing the application, the CLP lender sends a report to the SBA, which reviews the documents and gives an answer in three days or less (compare this to the normal two to three week wait). So the CLP lenders need to get the go-ahead from the SBA before they can give you a SBA guaranteed loan.
Those CLP lenders which are the best of the CLP group are allowed to become members of the second SBA lenders' program, the Preferred Lenders' Program (PLP). PLP lenders are given full authority to determine whether or not a business is eligible to participate in the SBA loan guarantee program, without reporting to the SBA.
ELIGIBILTY
To be eligible for the program, a small business must first attempt to find private-lender loans without getting SBA loan guarantees. This means that you will have to go to the banks and get refused by them before you can apply for SBA assistance. To apply for the private lender loans, your business will need to draw up a business plan and submit it. After you are refused in this first attempt at obtaining loans, your business plan will be used again when you approach the SBA for assistance in obtianing loan guarantees. The SBA will look at your business plan and see whether you satisfy certain criteria:
- Any loan made must be of sound value or secured by property such that there is a reasonable assurance of repayment. This means that you need to have some sort of collateral to secure the loan or a good business operation, good enough to lead to SBA to believe that you can pay back the loan. Collateral may consist of a mortgage on land or a building owned by the business or business-owner, assignment of receipts or accounts payable, a personal guarantee by the small business owner, some other valuable property owned by the business or the business owner.
- The owner of the small business must be of good character.
- The owner of the small business must have enough capital in the business so that, with SBA assistance, the business will be able to operate and pay its bills as they come due.
- Applicants must show that the the business has done well in the past and can expect to do well enough in the future to repay the loans.
- The applicant/owner must show that they possess sufficient personal resources to weather any hard times and keep the business afloat during such stormy weather, particularly if the business is a new one.
The MicroLoan Program was developed to increase the availability of very small loans to prospective small business borrowers. Under this program, the SBA makes funds available to nonprofit intermediaries, who in turn make loans to eligible borrowers in amounts that range from under $100 to a maximum of $25,000. The average loan size is $10,000. Completed applications can usually be processed by the intermediary in less than one week.
TERMS, INTEREST RATES AND FEES:
Depending on the earnings of the business, the loan maturity may be as long as six years. Rates are pegged to no more than four (4) percent over the prime rate. Fees are the same as for any 7(a) loan. Virtually all types of for-profit businesses that meet SBA eligibility requirements are eligible.
COLLATERAL
Each non-profit lending organization has its own loan requirements, but must take as collateral any assets bought with the microloan. In most cases, the personal guaranties of the business owners are also required. **
**Information obtained from SBA Website
NON-DISCLOSURE AGREEMENTS
Two different confidentiality agreements / non-disclosure agreements are offered, sold as a package.
1) External Contacts: This agreement is the one to use with contractors, vendors, consultants, potential employees, licensees and anyone else that will have access to your business. You can even have full-time employees sign this non-disclosure agreement, in addition to the employment contract.
2) Mutual Contacts: This is a "mutual" non-disclosure agreement, which stipulates that both parties (both you, and your contact) will not disclose proprietary information. This is used when talking to an "equal," like a potential partner, investor or even a competitor.
- protect your trade secrets, financial results and intellectual property from being revealed.
$29.99
