Small Business – Association Loan and Bank Loan

Small Business – Association Loan and Bank Loan

Business owners searching for a small business association loan are usually referring to a loan provided by the Small Business Administration (SBA). This government agency provides funding to small businesses that have been denied by traditional lenders, such as commercial banks.

The most common loan provided by the SBA is the 7(a) loan. In order to qualify, start-up businesses must supply the following documents: a statement of financial need, personal financial statement from each owner, a list of collateral to be offered, and a Profit and Loss Statement. Existing business must provide the following: financial statements (or tax returns) for past three years, a current and signed Balance Sheet, and a statement of funds needed and how they will be used. Most applicants are also required to employ fewer than one hundred employees and to provide a business plan. Certain variations of the 7(a) loan may require additional documentation or other criteria.

Small business association loans, usually referred to as SBA loans, are available through lenders who participate in the SBA’s guaranty program. With this program, the SBA guarantees a certain percentage of a loan made to small businesses to reduce the lender’s risk of not being repaid. Most commercial banks and several non-traditional lenders participate in the SBA program. To find out if a particular lender provides SBA loans, either call them or check on the SBA’s website. Loan amounts, interest rates, and repayment plans vary by lender and by an applicant’s financial history.

A small business bank loan generally refers to funding provided by a traditional lending institution. When looking for small business funding, it’s important to find a bank that has loans tailored to a small business’s needs and capabilities.

Many providers of small business bank loans do not have as strict requirements as with other types of loans. These banks may only ask to check an applicant’s credit reports, and, upon request, view the financial documents of the business and the applicant. Localized banks may require applicants to live in a certain area in order to qualify. Businesses are sometimes able to complete the loan application online, via the lender’s website. Typically, it only takes a few minutes to complete an application, and only a few days for the lender to review and approve the loan request.

Small business bank loans can usually provide up to one hundred thousand dollars to companies in need of start-up or operating capital. These loans can be secured with collateral or unsecured. Unsecured loans rely on the borrower’s signed promise to pay. If the borrower fails to repay a secured loan, the lender may seize the collateral. Although no assets are at risk with an unsecured loan, failure to repay can result in additional fees and damaged credit reports. Repaying a small business bank loan on time can greatly improve a business’s credit and make it easier to secure additional funding when the need arises.

Leave a Reply