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September 2002

The major concern for today's small business start-up and expansion is access to capital and credit. But, as many new entrepreneurs quickly discover, raising capital may not be easy; in fact it can be complex and frustrating process that will eventually increases the chances of business failure. However, proper information and knowledge about available sources of credit at an affordable financing cost will mitigate the failure factor. The SBA loan guarantee program provides vehicle to potential and existing entrepreneurs that have real potential, but cannot qualify for loans from traditional sources. Many entrepreneurs might be well aware of the SBA program and its rewards, but before going into the complexities it is important that an overview of the SBA program must be covered.


? Borrower: A new, potential or existing business owner.

? Private Lender: The bank or leasing company or approved private lender. The best source for small town business owner is their community or regional bank operating in that area that specializes in SBA loan.

? Small Business Administration (SBA): The guarantor of the loan.

[SBA Georgia Application kit is available from: 233 Peachtree Street, NE, Suite 1900 Atlanta, GA 30303, Phone (404) 331-0100; Acting District Director - Mitchell Morand]


? Good Credit and Residency or Citizenship

? Down Payment: Ranging between 10 - 25% of project cost in liquid cash or refinanced portion of existing partly or fully paid-off business assets. Starters must generate cash down payment from personal savings, using personal sources of credit for example credit card or personal lines of credit will impair possibility of getting approved. However, non-documented friendly credit through personal relation (not including spouse) is an alternative, as it will not mirror in the credit portfolio.


? Application to private lender

? Lenders Approval (subject to SBA Guarantee)

? SBA Approval and then lender closes the loan and disburse funds


A professionally presented loan proposal enclosing maximum details covering all aspect of business and personal profile will increase chances of getting the approval. Ideally proposal must contain information generally under following heads:

? General Information

? Business Plan or Feasibility

? Owner or Management Profile

? Market Information

? Financial Information

Diversity of SBA is convenient in a way that its categorization will increase the possibility to tailor loan proposal according to the particular situation. Following list although not comprehensive but an extensive coverage of available credit lines.

? 7A Loan Guarantee Program

o Primary Loan Program

? Special 7A Loan Guarantee Program

o Low Documentation Loan

o SBA Express

? CAP Lines

o Contract Loan Program

o Seasonal Lines of Credit

o Builders Line Program

o Standard Asset-Based Line

? SBA 504 Loan Program

? The Certified and Preferred Lender Program

? The 7 (M) Micro Program

? The Small Business Investment Company Program(SBIC)

? Community Adjustment and & Investment Program


? 7 (A) Loan Guarantee Program Ideal for starters carrying a limit of $750,000, maturity stretches to 25 years. Has an advantage of no early payment no penalties and no balloon payment. Loan proceed may be used to purchase fixed asset or equipments, renovation and augmenting working capital. Interest rates are 2.25% over prime* on 7 years maturities and 2.75% over prime over 7 years maturities.���

? SBA Express and Low Documentation Loan is an excellent opportunity for existing small business owners who wants to re-finance an existing high interest debts. These are fast track loans with least documentation, provided the business proves profitability in last 2-3 years as well as same prospects in future. Maximum amount that can be borrowed is $150,000. Interest rates are same as��� 7 A program with the exception that it will surpass 2.75% if loan amount exceeds $50,000.���

? 504 Program is also ideal for starters as well. This is an asset-based loan, which is fully secured against the property. An excellent feature of this plan is low down payment of 10%. Rest of the features is same as 7A plan but interest rates are lower than market in this case as well.

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