SBA Loan Guarantees

 
 

The SBA offers private lenders a guarantee on loans made to qualified small businesses. If the borrower fails to pay the loan, the lender can usually obtain up to 85 percent of the outstanding loan principal from the SBA. Some loans will even be eligible for a 90 percent guarantee under the Stimulus Act. Some Microloans will even carry a 100 percent guarantee in 2009. The government guarantees encourage lenders to grant credit that otherwise would not be available on reasonable terms and conditions. Commercial lenders often prefer a SBA-guaranteed small businesses loan because the federal guarantee not only reduces the lender's risks, but the bank will, going forward, have a readily available secondary market in which to sell the guaranteed portion of the loan. In addition, the guaranteed portion of the loan does not count against the federally mandated reserve funds that banks must maintain as protection against loan losses.

What are the most popular SBA loan guarantee programs? We discuss:

 
 

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