Monday, July 31, 2017

How to Acquire a SBA Loan


Before understanding the nitty gritties of the SBA loan application process it would be prudent to understand precisely what this loan is all about and how it can be utilized.
How to Acquire a SBA Loan

One particular loan is also referred to as the “SBA 504 Loan” or in layman’s terms “The US Small Business Administration 504 Loan”. Basically, this extensive loan program has been created with the core aim of helping a business entity in the acquisition of the required financial assistance, so as to be able to procure fixed and capital assets such as machinery, structures as well as real estate at below market rates so that the day to day business operations (as well as any expansion plans) can be conducted smoothly and without any major or significant cutbacks to productivity (in the case of business that are already fully operational).
The SBA basically offers a number of highly structured yet markedly different loan options that have been tailor made to suit the highly specific as well as specialized ‘capital needs’ of small and medium sized business organizations.
Here it is crucial to understand the difference between ‘capital’ vs ‘operational’ needs since the former is more concerned with the longer term and fixed assists rather than simple operational ones. Such as procuring an expensive machine at a manufacturing plant, rather than simply acquiring a loan to pay the electricity bill of that particular piece of machinery.

o   How it works?

The 504 program works through the distribution of the SBA loan in between three different parties.
Here the business owner has to put in at least a minimum amount of ten percent of the entire loan amount while a financial institution (such as a bank for instance) will pledge another fifty percent (or more as the case may be).
Finally, the remaining forty percent amount of the loan would be put up by a CDC or ‘Certified Development Company’. These CDCs have been created under a specific set of criteria and are bound to operate only, as ‘not’ for profit entities for the express purpose of supporting economic growth in their respective area of operations.
As a matter of fact, there do exist multiple such CDCs all over the state of Florida for the facilitation of many ‘up and coming’ business enterprises that require their financial services on a regular basis. 
The maximum amount of a typical SBA 504 loan may go up to dollars five million or so. However, this amount may be further increased by an additional five hundred thousand dollars for many diverse projects related to energy generation (with special emphasis on renewable energy resources).
A key point of an SBA loan is that if the business entity that has acquired the loan may not be able to pay it back and therefore be forced to default on its loans, the original lending institutions (i.e. the commercial bank or any other landing agency) is automatically paid off on a priority basis so that they are not at all that great a risk.  
Once free of the higher risks generally associated with such loans, the landing agency is less stringent with regard to disbursing loans and thereby stimulating growth throughout the state of Florida.

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