Ten SBA Loans Myths

Myth #1: One must already have beed rejected to qualify for SBA
Realty is completely the opposite. The SBA would prfer that you have not been declined elsewhere. One can go directly to an SBA lender first-time through

Myth #2: SBA is the lender of last resort
Reality is completely the opposite. Just because the government is insuring the loan does not mean the loans are of poor quality. SBA is not a bail-out program. In fact, the government guarantee has spurred a huge secondary mortgage market and a boom in SBA lending. In many cases, SBA is the first lender (they're not real a "lender" for small business financing.

Myth #3: SBA is a lender
Wrong. SBA does not have any direct lending authority. They simply guarantee loans made by qualified lenders against default. The amount various between 50 and 90% of the loan depending on the specific loan program

Myth #4: Sba has free money and grants
"There ain;t no such thing as a free lunch." Grantsdo not apply to for-profit businesses, and the SBA will not guarantee anything for free. Fees apply, usually built into the loan amount

Myth #5: SBA loans take too much time
This is not true, but is a holdover from the past when proceeses were much more paper intesive, and before tenchological improvements were inplemetned. Generally the loan process is about the same as an other commercial loan, however, once the paperwork and third-party reports are complete, underwriting for the guarantee is two days.

Myth #6: One must be a minority to qualify
This myth dates back to the old days when SBA made direct loans to minorities, but this discontinued years ago. SBA loans are open to any race and ethnicity. In fact, discriminating on the basis of such proteced classes is prohibited.

Myth #7: Dealing with the goverment has a lot of red tape!
There is the same documentiation as a regular commercial or real estate loan. SBA is one of the mist successful goverment programs, and hass very little to do with the actual process of obtaining the loan. If there is any "red tape," it is usually from the lender putting the loan together.

Myth #8: SBA interest rates are too high
Actually, SBA puts ceilings on interest rates. Usually they average 2.75% above prime. These rates are comparable to most commercial loans. If the loan is under the 504 program, the rate is actually better than what banks could offer.

Myth #9: SBA helps people with bad credit get a loan
Well, not really. It will help overcome finacing challenges for a borrower or business, but not a bad credit history. SBA helps especially when available collateral cannot meet conventional lending standards. But a good business plan, good cash-flow and a good credit history are still all required

Myth #10: Two much paperwork
Reality is that the SBA lender does most of the paperwork, while the borrower still does most of the signing! Of couse, all required documents for any commercial mortgage loans are required.