SBA Business Loan
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SBA Business Loan

By: Business Capital Group, LLC

The U.S. Small Business Administration (SBA) was originally founded in 1953
as an independent agency of the federal government to Aid, counsel,
assist and protect the interests of small business concerns, to preserve
free competitive enterprise and to maintain and strengthen the overall
economy of the United States.

Although the SBA has grown and evolved in the years since it was established
in 1953, its bottom line mission remains the same. The purpose of the
SBA is to help Americans start, build and grow businesses.

Through an extensive network of field offices and partnerships with public and
private organizations, the SBA delivers its services to people throughout
the United States, Puerto Rico, the U. S. Virgin Islands and Guam.

The SBA is an independent agency within the federal government that operates
under the authority of the Small Business Act of 1953.

The SBA can makes loans directly to businesses and acts as a
on bank loans. In some circumstances it also makes loans to victims
of natural disasters, works to get government contracts for small businesses,
and assists businesses with management, technical and training programs,
some of which can be done on-line.

The SBA has directly or indirectly helped nearly 20 million businesses and
currently holds a portfolio of roughly 219,000 loans worth more than
$45 billion making it the largest single financial backer of businesses
in the United States.

The SBA has survived a number of threats to its existence. In 1996,
the then newly Republican-controlled House of Representatives planned to eliminate the agency.
It survived and went on to receive a record high budget in 2000.

Renewed efforts by the Bush Administration to end the SBA loan program have
met congressional resistance, although the SBA's budget has been repeatedly
cut, and in 2004 certain expenditures were frozen.

SBA Loan Programs

The most visible elements of the administration are the loan programs it administers. The SBA itself does not grant loans. Instead, the SBA guarantees against default certain portions of business loans made by banks and other lenders that conform to its guidelines.

Contrary to popular belief, these programs are not generally for persons with
bad credit who can not get bank loans, nor are they primarily used for
startup funding. The primary use of SBA programs are to make loans
for longer repayment periods and with looser affordability requirements
than normal commercial business loans.

Also, a business can qualify for the loan even if the yearly payment would
be the same as the previous year's profit, whereas most banks would
want payment for a loan to be no more than two-thirds (2/3) of the prior
year's profits for a business. The lower payments, longer terms and
looser affordability calculations allow some businesses to borrow more
money than they could otherwise.

One of the most popular uses of SBA loans is for commercial mortgages on
buildings occupied by a small business. These programs are chosen because
most bank programs, while having similar payments and rates, require
borrowers to refinance every five years.

How Can I Benefit From The SBA?

The Small Business Administration (SBA) has created a program of government-guaranteed
loans designed to help give small businesses that may not otherwise
qualify for credit get the funds they need. SBA loans make it possible
to qualify businesses more easily and provide them with more flexible
terms than conventional loan options, letting you preserve working capital
for other expenses.

Qualifying for an SBA loan is easier than qualifying for other loans. First, the
SBA allows higher loan-to-value ratios. Depending on your loan request,
you may be able to borrow up to 90% of your financing needs. Second,
we consider the projected income of your business, not just historical
cash flows, when making a decision. This may be especially advantageous
if your business is growing rapidly.

SBA loans can help growing businesses purchase or renovate real estate,
acquire fixed assets such as heavy machinery or specialized equipment,
borrow working capital for ongoing financing needs, or fund the acquisition
of new businesses.

Who are SBA loans for?<

SBA loans are for businesses that are:
Owner-operated
For profit
Organized as a sole proprietorship, corporation, or professional partnership
Within the size guidelines designated by the SBA
Unable to secure other credit under reasonable terms SBA Loan Industry

The SBA loan industry can be divided into distinct categories:

The largest United States Banks, such as Bank of America and Wells Fargo, generate the
bulk of their SBA loan volume by the loans, especially the express loan
and business line of credit, being offered to those who would be declined
for a normal bank loan due to factors such as length of time in business
or slightly stricter affordability factors. These banks have sophisticated
computer systems that generally makes this process seamless, and are
quite different from other financial institutions who utilize SBA lending
for separate and distinct purposes.

SBA loans are used heavily by banks of all sizes to finance the purchase or construction
of business owner occupied real estate (i.e. real estate purchased by
a business). Many banks only offer SBA loans for this purpose. In particular,
they are using to finance properties that the bank would consider too
risky to finance on their own, due to them being of a special or environmentally
risky nature that can make their resale value limited; these properties
include Motels, Gas Stations, and Car Washes.

SBA loans are also used to allow individuals to buy existing businesses. Since, unlike
in real estate transactions, commercial lenders are allowed to pay a
referral fee to business brokers who help people buy and sell businesses,
this segment of the industry is dominated by smaller banks and standalone
finance companies who engage in this practice.

Criticism

Businesses applying for SBA loans are supposed to be ineligible for financing elsewhere,
as the applicant bank affirms. Designed to avoid direct competition
with banks, this provision allows the most promising projects to be
funded by the private sector, leaving higher risk projects to be picked
up by the government, resulting in the government holding a higher share
of non-performing loans.

Though it accepts higher risk, most SBA borrowers pay their loans, the same
loans that lenders affirm could not receive credit elsewhere. The Agency
has traditionally had a currency rate on its loans of 90% or more, not
meaningfully worse than banks.

The SBA is also one of very few agencies that pays its own way and does
not drain the treasury for its loan programs. Price Waterhouse affirmed,
some years ago, that the tax revenue generated by only a handful of
SBA startup loans more than paid all the operating expenses for the
Agency.

One of the primary uses of SBA funding is for business owners to get a loan
to buy the property their business occupies. Owning the property and
having the business rent the property from the owner is a form of a
tax shelter, so the SBA has been criticized for aiding tax shelters.
Of course, legally taking advantage of tax law provisions is completely
ethical.

Various banks are often criticized for offering or writing fewer SBA loans proportionally
than other banks, which critics see as a sign of discrimination. However,
others counter that SBA loans are equivalent to or many times worse
than what the banks offer themselves, so a customer of that bank might
choose the normal bank product more often than their SBA product.

Overall, the SBA creates a vast avenue of opportunity for companies looking for a
relatively cheap source of capital.

For more information on the SBA and other excellent ways to secure a small business
loan, visit our website at Small Business Loans.

Article Source: http://articlenexus.com

Business Capital Group, LLC SBA Small Business Administration

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