Sba loans are the most common loans offered to small businesses. These programs are available through qualified lenders. Most banks and non-bank lenders offer these types of loans, but some are much better than others with Sba loans. Because these programs are offered through a non-bank lender or bank, if the institution does not want to extend this offer to the client (even if the client qualifies for the loan under the basic SBA 7(a) standard) the SBA cannot force the lender to give the loan to the customer. These loans can be either term loans or lines of credit. There are restrictions on how SBA funds may be used. The following uses for proceeds from an SBA loan are not allowed;1. Refinance of existing debt, if the current lender may take a loss if the debt is not refinanced.2. Partial purchase of an existing business, or partial change of ownership of a business, if the business will not benefit from the change of ownership.3. Reimbursement of funds owed. This includes equity injection, or reimbursement of an equity injection given with the purpose of maintaining business operations until the SBA guarantee loan is disbursed.4. Repayment of federal or state withholding taxes or other funds held in escrow.5. For a business that is not sound.Lenders structure the loans based on SBA-guarantee standards. The lender provides the funds to the borrower, while the SBA guarantees a portion of the loan to the bank; both institutions share the risk on the loan. The SBA does not lend money, the bank does. Lenders evaluate whether they can do the loan themselves, or use the SBA guarantee if the application has weaknesses. Most banks like to see that the business has been in operation for at least 3 years before it will grant a commercial loan.) Also, banks do not have the same restrictions as the SBA. Some banks can make loans to non-profit organizations, gambling business, or even speculative businesses such as Real Estate Investing.
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