Small business lenders are certified by the US Small Business Administration to provide guaranteed funds to small business owners. Due to the diversity of applicants and different types of businesses, the SBA partners with its lending partners to make it easier for small businesses to obtain financing for new ventures. Their involvement has allowed small business owners to obtain longer-term loans and therefore reduce the monthly payments incurred. This gives businesses a longer period of time to mature and stabilize without having to bear the heavy burden of a large loan repayment amount.
With this, the SBA has designated a list of a few thousand lending partners in each state to extend this service to the general public. Of course, borrowers are still required to submit completed loan application proposals to the lender, except that the SBA is the guarantor for such loans. This generally means that if the borrower defaults, the risk of default will fall on the SBA, since they will be responsible for repaying the loan.
Additionally, the established criteria for small business loans make 90% of all businesses qualified applicants for these loans. Other than that, businesses are not burdened with balloon payments and high interest rates, which any other commercial lender would otherwise offer. Also, fixed rate loans and variable loans are available to business owners. Therefore, business owners have more options in deciding the type of loan that would be right for their business.
The purposes of acquiring a small business loan vary depending on the situation of the business. Small business owners can obtain loans to purchase real estate for business expansion purposes, to provide cash flow to support a large project, to lease machinery to operate a business, to use as working capital, or to purchase inventory. Whatever the reason, business loans are reviewed and approved by these microlenders after a thorough evaluation of business background, feasibility, and purpose. The only difference is that thanks to the support of the SBA, they are more willing to make loans, since your risk is minimal with repayments guaranteed by a government agency.
