3 Signs an SBA Loan is Right for Your Company

The Small Business Administration (SBA) is a government agency that is responsible for helping individuals launch businesses in their communities. The SBA attempts to accomplish its primary task by partnering with local lending institutions and other non-profit agencies to help fund startups and business expansions. The federal government states that by helping small businesses get established, the overall economy will likely be strengthened. The SBA does not have any money to loan, but SBA loans refer to loans that the agency guarantees in whole or part to pay if the business owner defaults. Obtaining one of these loans is not as hard as you might think, and if you qualify, you could get the initial capital you need to start or expand your business.

Since lenders that work through the SBA know that any risks they decide to take with an applicant is covered by the federal government, they can generally relax some of their stringent lending rules. However, do not think that they will hand out free money to anyone. The program works because the SBA, the lenders and the community economic agencies all work together to help ensure that deserving business owners can receive the money they need to build successful businesses. SBA loans need to go to viable businesses that have a chance of succeeding, or all the money loaned is just wasted. Potential lenders will usually want to know that you have first-hand business knowledge in the field in which you are starting a business.

Your personal integrity also plays a part in determining if you can receive money associated with the SBA. If you have been involved with shady business dealings in the past, you probably will have a tougher time obtaining a loan. If you have had failed businesses, this fact alone will not exclude you from obtaining an SBA loan, but you will probably need to have a good reason for the failure. If you were just the victim of bad luck or a poor economy, you still may have a chance. However, if your past business dealings have been questionable or illegal in any way, you may be wasting time trying to get a loan through the government.

The SBA will also closely examine your creditworthiness. If you have bad personal or business credit, it will hurt your chances of receiving an SBA loan. If this is your situation, you may need to seek a partner with excellent credit or work for a few years to improve your credit rating before applying for a loan.

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