Question

perform research on the SBA website to find answers to the following questions:

Describe the overall process of obtaining a small business loan.

What levels of funding are available through the SBA?

What criteria does the SBA establish to qualify applicants for loans?

What reporting is required of the borrower?

Are there special programs for minority owners, and how does one qualify for such programs?

How long does the approval process take?

What is the success rate of SBA loans?

What are the characteristics of successful loan applicants?

Apply all the answers to these questions to your current or potential small business.

Answer 1

1. the overall process of obtaining a small business loan :

the best place to apply a loan from is the very bank the business carries out their financial transactions from.

first the applicants for the small business loans have to fill up an application for the loan.

next, a check will be carried out on the applicants credit score, which determines how well the borrower has paid the past loans of any. the lenders will check the financial ratios, and determine weather what collateral and equity they have. what is their free cash flows, and interest paying ability with the help of ratios. lastly, the lender will decide weather to provide or decline the loan application.

2. the levels of funding available through the SBA is :

1. long term financing 2. short term financing 3. business development program 4. traditional banks 5. micro loans 6. credit cards 7. veteran loans 8. export loans 9. grants . 10. venture capital.

grants are special type of loans and are only available to non profit agencies. the mission of the organisation seeking the loan has to be alligned with the mission of these organisations offering grants. venture capital is a form of equity funding which provides loan for the entrepreneurial ventures depending upon the size and nature of asset.  

3. the criteria required by the SBA before providing the laon is:

1. collateral : adequate collateral has to be submitted for the application of the loan, plus a personal guarantee from someone who owns more than 20% of the business. in case of personal guarantee , the credit score and the personal assets of the perosn providing the guarantee will be on the hook.

4. the reporting required by the borrower is :

1. personal information :this includes some personal information, the current or the former address and any criminla record in the past.

2. personal credit report : a credit score above 750 indicates good payment history of the borrower.

3. business credit report: a good credit history of the business also required for the application of the loan.

4. financial statements : a proper analysis of the financial statements and ratios indicates the paying capacity of the business.

5. income tax returns : by submitting the personal and business income tax filings, indicates work ethics and income.

6.collateral and other legal documents : adequate collateral has to be submiited with documents proving there authenticity to support the loan amount being borrowed.