About Small Business Loans

Small businesses require special types of loans. They request more money than a personal loan can support but less than a large commercial loan. The U.S. Small Business Administration was created to be an advocate for small businesses that lack upfront capital and need to rely on a loan to get started.

Role of the SBA

The SBA does not make loans directly to small businesses. Instead, it sets guidelines for lenders to follow. When small business partners go to an SBA sponsored lender, they are applying for a modified commercial loan. The SBA also guarantees repayment of the loan, taking some of the credit burden from the business partners.

Types of Small Business Loans

There are three types of small business loans. The 7(a) Loan Program offers loans to small businesses with special requirements. This includes businesses that deal in foreign finance or foreign trade. The Microloan Program provides small short term-loans for businesses with immediate needs. For example, a not-for-profit organization could request a microloan to assist with program development. The CDC/504 Loan Program is designed to give businesses long-term support. This loan program assists in stimulating the economic growth of a business for long-term presence in the community.

Applying for a Loan

The lender will need to see documentation of a legal business before accepting your application. This includes financial statements, projected financials, background information, business overview, resumes and inventory. The lender will also ask for business licenses and proof of taxes paid. A comprehensive application checklist can be found on the SBA website.