Do I qualify for an SBA Loan?

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What is The Small Business Administration? The Small Business Administration is a United States Government Agency helping support small businesses through financing programs and education as well as hands on training. There are several types of loans available through the SBA. The most common are 7(a) guaranteed loans and 504 Real Estate loans.

The 7(a) Loan Guarantee Program is designed to help entrepreneurs start or expand their businesses. The program makes funds available to small businesses through qualified banks and non-bank lenders. The 504 Fixed Asset Financing Program is administered through non-profit Certified Development Companies throughout the country. This program provides funding for purchasing real estate or construction. Of the total project costs, a lender provides 50% of the conventional first financing, a Certified Development Company provides up to 40% of the financing through a 100% SBA guaranteed debenture, and the applicant provides approximately 10% of the financing except for special purpose.

What does it take to obtain a SBA Loan? The general requirements include: the applicant must be a for profit business, the business must be independently owned, the firm must be non-dominant in its field, the applicant must located in the United States, and the applicant must demonstrate a need for the request. These are the general requirements but in order to be eligible, there are three types of criteria:

1) Business type and size:
Eligibility is determined by The National American Industry Classification System (NAICS) based on size and type of the business up to 500+ employees and 6 – 25 million in revenue depending on type of business.

2) The use of the proceeds:
A) Permitted uses of proceeds - the use of the proceeds must fall into 5 main categories: working capital, debt refinance, inventory, equipment, and real estate. Generally the term should be the shortest appropriate to the business’ ability to repay the debt
B) Non-Permitted uses of proceeds – SBA Loans cannot be used to repay owners, pay delinquent taxes, refinance debt (to a creditor who stands a risk of loss if loan is not granted), personal investment, loans to businesses who have defaulted on previous government loans.

3) Personal resources and issues of the principal

Most small businesses and all legal forms of organizations are eligible such as:
1) Proprietorships
2) Partnerships
3) Corporations
4) LLC’s
5) Independent Franchises

Types of businesses that are ineligible are the following:
1) Businesses involved in real estate or other speculation
2) Financing where money is stock in trade
3) Pyramid or multi-level marketing businesses
4) Floor planning for auto or appliance dealers
5) Gambling or illegal enterprises
6) Religious institutions
7) Firms dealing in material of a prurient sexual nature
8) Any borrower who defaulted on prior Federal loans or Agencies including Student Loans

The SBA is primarily concerned with an applicant’s personal liquidity, resources and net worth. Business owners with large amounts of liquid assets are seen as able to self finance, conventionally finance or contribute to the needs of their business. The primary test for the Agent is whether the desired financing is available from sources other then a government guarantee.

Who are SBA Loans available to?
SBA loan programs are open to US citizens as well as legal resident aliens. All non-citizens must have their immigration status verified by the INS using a G845 with a copy of INS Form 1-155 “green card” attached along with the written permission of the individual for the verification. Each applicant will undergo a detailed Criminal Background check and ones with prior arrests, convictions or current probation/parole or indictment will be reviewed very carefully. Recent or significant criminal history may affect eligibility. Some non-resident aliens are eligible as long as the business is in the U.S. and the owners have foreign investment Visa’s.


Cole D. Harris
iBank Comm/Tech Team
CHarris@ibank.com
(714) 549-4226 ex: 122
3151 Airway, Building G-3
Costa Mesa, CA 92626