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SBA BUSINESS LOAN OPTIONS

The Federal Small Business Administration does not directly fund loans. They are a government agency guarantor for loans that are made by the lending agency. This allows small businesses in search of funding to obtain a loan that the bank would not normally entertain. The Federal government is basically assuring that should the loan go into default they will reimburse the lender for between 50% - 80% of the principal balance. Therefore the interest rates on SBA guaranteed loans can be expected to be higher than normal going bank rates; usually 2.5% to 4.5%.

Three Popular Accessible SBA Loan Programs for Small Businesses

1. SBA Community Xpress Loans:
Shown illustrated on this page of the SBA web site.

• $5,000 to $25,000 (in $5,000 increments)
• One page application
• Ten year term
• Rapid Response; Funded electronically normally within 14 days
• No Collateral Required
• No Prepayment Penalty
• No Balloon Payments
• No Business Plan, Tax Returns, or Financial Statements needed
• Current Interest Rate - Prime + 4.5%
• Loan Fee for $ 5,000 to $10,000 loans is $450
• Loan Fee for$15,000 to $25,000 loans is $550
• Credit Score not used for loan decisions (but should be should be 650)

Application forms are available at the SCORE office or on line at Strategies for Small Business
Send applications to:
Strategies for Small Business
442 Diablo Road, Suite 137, Danville, CA 94526, Telephone (925) 899-8449
Funding is through Superior Financial Group, San Francisco, CA.

Community Express Loans are also available from the WalMart local Sam's Clubs. A buiness membership is required.

2. SBA Express Loan:
Shown illustrated on this page of the SBA web site.

• Maximum $350,000
• Business Plan Required
• Loan interest rate 8 -10%
• Term 7-10 Years
• Collateral is required
• Biographical sketch/Work History must be provided
• Personal Financial Statement required
• Need a good Credit Score
• Other requirements may be imposed at the Bank's discretion or to meet the institution's lending practices.
  
  Applications and funding are provided through SBA Preferred Lenders which are listed on this page of the SBA web site
  

The SBA Preferred Lenders with Knoxville locations

3. SBA 7(a) Loans
Shown illustrated on this page of the SBA web site.

• Maximum Loan $2,000,000
• Maturity: Up to 25 years (real estate, equipment) & 7 years (working capital)
• Interest Rate: Prime + on a case by case basis
• SBA Guaranty Fee; 3% to 3.5%
• Prepayment Penalty: 1st year 5%; year 2 - 3%; 1% 3rd year
• Comprehensive Business Plan Required
• Other information and/or documents may be required by the lending institution
  
  Applications and funding are provided through SBA Preferred Lenders and participating local banks

June 4, 2007 Rev Feb 22, 2008, Rev July 22, 2010
SOURCE: Chuck Christiansen, SCORE Counselor

The material in this publication is based on work supported by the U.S. Small Business Administration under cooperative agreement SBAHG-04-S-0001. Any opinions, findings and conclusions or recommendations expressed in this publication are those of the author and do not necessarily reflect the views of the U.S. Small Business Administration. The information contained in this publication is believed to be accurate and authoritative but is not intended to be relied on as legal, accounting, tax or other professional advice. You should consult with a qualified professional advisor to discuss issues unique to your business.