Outside of the acronym, do you really understand what SBA loans are about? Many businesses may know the name Small Business Administration-SBA- but few know the inner workings of the what and the how. Here is a snapshot of the SBA world from an insider perspective.
Most businesses are familiar with the acronym SBA. The SBA-backed Paycheck Protection Programs or PPP loans elevated the brand awareness amid COVID. There is still however, a huge gap in perception versus reality of what a SBA loan is and how the process works.
The U.S. Small Business Administration (SBA) is a government agency providing support to small businesses. The SBA was created on July 30, 1953, by Republican President Dwight Eisenhower with the signing of the Small Business Act. The SBA’s mission was to “aid, counsel, assist, and protect the interests of small business concerns, to preserve free competitive enterprise and to maintain and strengthen the overall economy of our nation.”
The SBA is the only cabinet-level federal agency fully dedicated to small businesses. It acts as a go-to resource and voice for small businesses, providing counsel, capital, and expertise.
Contrary to popular belief, SBA does NOT make the loans. SBA partially guarantees up to 85% of the loan amount. The actual SBA loans are made through a network of approved financial institutions (traditional banks and non-bank lenders)who lend money to small businesses. Since the loans contain a partial guarantee, SBA lenders are able to extend more favorable terms that will benefit many small businesses.
Since, SBA loans involve a government entity, the application process is very thorough and restrictive-often to the chagrin of many businesses not used to the intense financial scrutiny.
If you are applying for an SBA loan, make sure you have all the required documents.