What is NOT permitted when applying for Sba loans

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.

What Are Sba loans And How To Apply For One

Small businesses that cannot secure a loan through conventional means can apply for one of the Sba loans in order to obtain funds. However, they must first attempt to obtain a loan through a commercial lender, private source, or bank. Once the business is turned down for the loan, the owner may then apply for an SBA loan provided his business meets the SBA requirements including its definition of a small business.The business must be owned and operated independently in order to qualify for one of the Sba loans. Additionally, it must meet the predetermined specifications for size as far as the number of employees and revenue. Also, it cannot be a major company in its field. If approved for the SBA loan, the owner of the business is expected to comply with SBA regulations regarding matters of discrimination and public services.The SBA loan is acquired through the private sector, but the SBA (Small Business Association), a governmental agency, guarantees the loan. The business owner must pledge to repay the loan in its entirety before the SBA grants him approval for the loan.Several SBA loan programs are available. It is up to the borrower along with guidance from the lender to determine which one of the Sba loans is best suited for his needs. The interest rates, typically lower than those offered from the private sector, vary across the different types of Sba loans.When completing your application for an SBA loan, it is necessary to bring the following documentation with you:* A Business Plan- this details the type of business venture that you have and how long it has been in existence, along with the number of employees, actual or projected earnings, and ownership structure. This should include copies of business lease and business certificate.* A Loan Request- this details the manner in which the proceeds from the loan will be spent.* Personal Financial Statements- the personal financial statements, including signed copies of federal income taxes for previous three years of anyone who owns a minimum of 20 percent of the business must be provided. This includes owners, partners, stockholders, and officers.* Business Financial Statements- the complete financial statements for the business for the last three years must be provided including current business balance sheet, information on subsidiaries, projected outlook for income and finances of the business, and signed copies of federal income taxes for previous three years.* Intended Collateral- this details the specifics of the property being offered as collateral for the SBA loan.* Personnel Resumes- the resumes, including personal financial statement and history, of each major participant in a high-ranking, managerial position might be requested.

Vice President Biden Makes His Second Trip to the Gulf Coast; SBA Assistance Loans Surpass $15 Million

July 23, 2010 -- In his second trip to the Gulf Coast since the Deepwater Horizon oil spill began, Vice President Joe Biden traveled to Theodore, Ala., yesterday to assess efforts to counter the disaster. During his visit, the Vice President toured the Theodore Staging Facility, met with response personnel, inspected boom, and participated in a roundtable discussion with fishermen and small-business owners from the area. He was joined by National Incident Commander Admiral Thad Allen and NOAA Administrator Dr. Jane Lubchenco. Afterwards, the Vice President stressed the Administration's commitment to restoring the Gulf Coast: "We're not going to stop until this area -- all the entire Gulf -- has recovered; until the economy of the Gulf is revitalized and literally a way of life is restored," he said. "Because we're not just talking about a natural ecosystem that's in danger down here. We're talking about an economic ecosystem. "We're also talking about a cultural ecosystem, a whole way of life. Whatever it takes to make this Gulf right, we're going to make it right." Approved SBA Economic Injury Assistance Loans Surpass $15 MillionTo date, the U.S. Small Business Administration [SBA] has approved 181 economic injury assistance loans, totaling more than $15 million for Gulf Coast small businesses impacted by the Deepwater BP oil spill. Additionally, the agency has granted deferments on 707 existing SBA disaster loans in the region, totaling more than $3.7 million per month in payments. For information on assistance loans for affected businesses, visit the SBA's website at http://www.sba.gov/services/disasterassistance; call 800-659-2955 [800-877-8339 for the hearing impaired]; or e-mail disastercustomerservice@sba.gov. Additional ResourcesFor information about the response effort, visit http://www.restorethegulf.gov/. For specific information about the federal-wide response, visit http://www.whitehouse.gov/deepwater-bp-oil-spill. SOURCES: U.S. Small Business Administration, Unified Command for the Deepwater BP Oil Spill, The White House [photo by David Lienemann] ###TAGS: Alabama, Deepwater BP oil spill, Deepwater Horizon, economic development, economic impact, economic recovery, economy, fishing, Gulf Coast, SBA, small business, Thad Allen, Vice President Joe Biden, Deepwater Horizon Incident Joint Information Center, disaster loans, National Oceanic and Atmospheric Administration, NOAA, U.S. Coast Guard, USCG

Using the 7a Sba loan for a Business Acquisition

One of easier ways of becoming an entrepreneur is to acquire a business that has already been established by someone else. The risks related to acquiring a business are significantly lower than starting a business from scratch. Established businesses already have customers, an operating history, and hopefully profits as well. Additionally, obtaining a business loan for the acquisition of a business (while more paperwork) is usually easier than obtaining financing for a startup. This primarily due to the fact, again, that the risks are lower. The 7a Sba loan can be used for business acquisition purposes. As we have discussed before, the flexibility of this loan can allow you to finance varying parts of the acquisition differently. Prior to applying for a SBA guarantee, you should see if the business for sale has been preapproved for a Sba loan. If a business broker is involved then the broker may have acquired pre-approval from the SBA so that the transaction can happen more quickly. Additionally, a business broker will have generally assembled much of the paperwork required by the bank and the SBA in order to render both a lending and a guarantee decision. From time to time, business owners that are selling their businesses will already have a business plan in place showcasing the necessary components of the business and the owner's anticipation of how the business will grow over the next three to five years. This business plan is generally modified by the incoming owner based on the ideas that the new owner will implement once the business has been acquired.Whenever you intend to acquire a business, it is imperative that you complete your due diligence. Prior to applying for a 7a Sba loan, your accountant should thoroughly review the profit and loss statements, cash flow statements, and balance sheet of the prospective business to ensure that they are factually correct and match the business' tax returns.

Top 4 Mistakes That Borrowers Make Following Sba loan Default

1) Run and Hide - If you want to have any hope to save your business, the worst thing you can possibly do is stick your head in the sand and ignore the phone calls and letters from your lender. It's certainly unpleasant to deal with people whose job it is to shut you down, but avoiding them isn't going to make it any better. If you don't want to deal directly with the bank, engage an SBA workout expert to represent you.2) Start Selling Equipment - Hey, this ship's going down, so why not clear some cash while you can, right? Here's why: Your lender most likely has a claim to your business assets, so if you sell the business assets without the banks blessing, you open yourself up to fraud allegations from your lender. The guy you sold the stuff to won't be too happy either when the bank shows up and yanks the equipment from him.3) Claim Doom and Gloom - Many borrowers think that if they can convince their banker that things are truly awful with no hope of recovery, the lender will take pity and offer them assistance. Not true. If a lender thinks your business has no chance to survive, they will move quickly to foreclose and get judgments granted against you and your business. The lesson here is to just tell like it is....don't over-sell your need for assistance, but at the same time don't sugar coat it and make promises you can't keep. Just tell the truth.4) Make Deals With The Devil - Some people are so frantic about the possibility of losing their business, they'll sign up with the first workout firm that is willing to promise them the moon and the sun and the stars. Watch out for wolves in sheep's clothing. NOBODY can guarantee a successful workout. NOBODY can legally convince the SBA to lower your loan amount while letting you stay in business (only bankruptcy courts can do that). If someone promises you a deal that sounds too good to be true....well, you know the rest.

The SBA Commercial Loan Program You Must Know About

Knowledge is half the battle to getting funding in commercial finance these days. Half the battle is finding the loan programs that are not just in existence, but actually providing funding for commercial projects. The SBA has a program known as the 504 that is a real winner if you can qualify.The capital markets have gone through wild fluctuations this past 15 years. We've gone from quick and easy money that just about anyone could get for a project to the near failure of the markets to a state of cheap, but tight, money. As money has become tight, many have argued the commercial finance markets are dead. They are wrong, grossly so. This is because the agency lenders like the SBA have been trucking along without change through the entire period.The CDC/SBA 504 loan program is a combination financing package. It is designed to assist small businesses with large asset purchases such as real estate. The funding comes with a catch, however. It is tied into community redevelopment areas, which is where the Community Development Company ("CDC") comes in. The SBA does not provide direct loans or guarantees to the borrower, but does so through the CDC in the area that originates the financing.The 504 program creates a four party relationship. The first party is, obviously, you. As the borrower, you must put down 10 percent on the deal. The second party is a private bank that must put up a first for the initial 50 percent borrowed. The CDC then comes in and funds a further 40 percent with the SBA guaranteeing it. This may sound convoluted, but it is actually a tremendous opportunity. It provides you with 90 percent loan-to-value financing and makes the first loan from the commercial bank fairly easy to get since they sit in a first position and have loaned a much smaller percentage then they would in a traditional deal.The CDC/SBA 504 loan program is a real winner. That being said, it is also a complex deal with four parties involved. Make sure you retain an experienced commercial broker before seeking out this financing.

The Process for Obtaining an Sba loan

It's time to grow your business, you have managed it well, you've been fiscally responsible but you can't get a loan so you decided to turn to SBA who is willing to guaranty up to 75% of the loan. But how do you do it?First contact your local lender, as the SBA does not directly loan and instead acts through intermediaries guarantying loans for those intermediaries. If your lender thinks your application and plan are strong enough, they will contact the SBA if you lack the security of their normal standards.Also check your eligibility as the different types of loans have different eligibility requirements and applications from ineligible lenders won't be considered at all. You may also want to see if you are actually eligible for a non Sba loan.At this step look for special benefits you may get such as woman obtaining pre-qualification through non-profit or other benefits for being a minority.Now when you get ready to give your application remember the SBA is not entirely satisfied with just your basic finances, your character and personal responsibility and history as well as plans for the funds provided should also be included. They want to know they can trust you with tax payer's money. Be as honest as you can paint the best and most accurate picture of yourself as possible. When that's done submit your loan and wait for approval, most eligible applications are approved so don't sweat too much about it.Most of the work of the application will be gathering all the information about yourself, your history, and your plans. This may be time consuming but it is essential. Also talk with your local lender about the condition and quality of your application and that it has been completed correctly.Requirement of Personal Financial Statements: You will need to list all your personal assets. You will need to list all of your liabilities. You will need to list all your monthly payments on different bills. You will need to list your personal tax information for the past three years.