If you are in need of financing to expand your business or if you are facing financial difficulties that have made it necessary to obtain a loan from a bank, you should consider applying for a small business loan from the SBA. The SBA is an agency of the federal government, responsible for acting as a liaison between lenders and borrowers. You will want to work with one of their approved lenders if you are planning to get a loan through their program. Each year, thousands of small businesses seek funding from the SBA to meet their start-up needs. The SBA has detailed guidelines that will help you choose the lender that is right for you and your business.
The U.S. Small Business Administration or SBA's SBA504 Loan or Certified Development Company Program is designed to give small business owners access to low-cost financing for the acquisition of fixed assets, such as buildings, land and machinery, that are usually too expensive for private investors to finance. To qualify for this loan program, you will have to submit an application that explains why you need an SBA loan, how you plan to use the funds and what steps you have taken to assure the lender that you are a good risk. While the SBA does not collect information about past credit history, they do monitor the lender's loan activity. They also conduct research to find out the costs that might be associated with your proposed business model. Lenders that participate in the SBA's Program are evaluated on a case-by-case basis to ensure that they are providing borrowers with quality loans and that they are not participating in practices that might harm the financing options available to smaller businesses.
Typically, the SBA loans that are available to nontraditional borrowers include cash loans, mortgage loans, commercial real estate loans and trust deeds. Many borrowers prefer to receive these loans in exchange for their personal assets, such as jewelry or electronics. It is possible for a lender to approve a loan based upon your personal assets if you demonstrate to them that your reliance on those assets will cause undue hardship on your business. As long as the lender can determine that repayment would not be financially feasible, they are likely to issue a loan.
In addition to SBA loans and franchise business owners looking to raise capital, there are a variety of other sources of funding that you can consider as well. Some of these options include borrowing money from friends and family, obtaining a small-business loan from a private lender or seeking a line of credit from a federal agency, such as the Small Business Association or the Veteran Administration. There are also a variety of government programs that provide loans to small business owners, such as those based on the owner's income, capital investment, the location of the business, industry standards and patent protection. You can find more information about these programs by searching the Internet.
As previously noted, some of these SBA loans based on income enable businesses to take over their immediate operations and focus on building out their future operations. For example, a small business owner may receive a loan to purchase additional equipment to accelerate the growth rate of his business. He can use this money to hire additional employees, expand into a different location, purchase raw materials or expand into a different business model. Because the lending rates are usually very low, these types of loans can be utilized to rapidly take control of operations in the face of significant obstacles.
There are two basic SBA loans that can be used for working capital financing: The Standard Model (which is based on personal income) and the Plus Model (which are based on business assets). Both of these lending methods require that borrowers provide a detailed business and personal financial background before they are approved for either loan type. These financial reports will include personal and business financial data such as bank statements, income verification, W-2 information, and any other documents that verify your ability to repay the debt. To ensure lenders are able to offer you the best financing option, it is a good idea to work with an experienced attorney who specializes in working capital loans.
Working capital loans are necessary for many small businesses because most start-up expenses exceed cash flow in the first year of operation. Because of this, most start-ups need to obtain funding in the form of short-term loans that can pay off the company's expenses and quickly return cash to its investors. To find the best financing option for your business, work with an attorney who specializes in working capital loans to find the right loan for your business's needs and requirements.
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