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SBA 7 a loan guarantee

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SBA’s main loan program is the SBA 7 a loan programs, and these come with the SBA 7 (a) loan guarantee. This is a great loan program for small businesses to apply for as it reduces lender risk, and improves borrowing terms. It is structured so as to be both affordable and doable for both the lender and the borrower. SBA 7 a loans are generally for the small businesses that are unable to obtain reasonable terms and funding elsewhere. They can be for start-up small businesses or existing small businesses, and carry a guarantee based on the amount borrowed.

An SBA loan means it is not provided by the SBA, but by SBA partners, but is guaranteed by it. This means that if the borrower does not pay, the SBA will reimburse the lender for a portion of the loan. The amount depends on the SBA loan type. This is great for lenders because it means that when they lend money to small businesses, they are taking less risk and have a better chance of recouping any losses. They may lose a percentage, but generally, the SBA guarantee is high (think 80%). It is great for SBA borrowers because it means there is a better chance of getting financing for their small businesses.

The SBA 7 a loan guarantee is just like mentioned above. The SBA does not provide the loan, but they guarantee it, meaning them pay back a portion to the lender if the borrower fails to meet the terms of the loan. Of course, this percentage depends on how much is borrowed. The guarantee for 7 (a) loans is set up to help some specific small businesses. For example, there are loan programs that carry the 7 (a) loan guarantees only for rural business loans, or export loans.

There are specific SBA 7 (a) loan requirements and structuring:
1. The lender has to show why they are unwilling to provide funding without SBA guarantee. Or why they won’t provide funding with reasonable terms (according to the SBA) without SBA guarantee.
2. The maximum loan guaranteed by SBA with the 7 (a) loan program is $1.5 million.
3. The SBA guarantees 75% for loans over $100,000, and 80% up to $100,000.

In addition to the restrictions on the loan, small businesses must meet eligibility requirements for each loan, for example, they may need to use the funds to expand into exporting, or be a rural business owner in order to qualify for an SBA 7 (a) loan. Unlike some SBA loans, SBA 7 (a) loan proceeds can be used for start up businesses that are looking to fill specific industry areas, to purchase existing businesses, or expand an existing business. It is a great loan for small business owners, or want to be small business owners to get to finance their business, improve cash flow, and grow their business as they want to.

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Posted by DK
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