The Small Business Administration (SBA) is an agency of the US government that supports entrepreneurs and small businesses. It is the duty of the SBA to “aid, counsel, assist and protect, insofar as is possible, the interests of small business concerns.” A major function of the SBA is partnering with banks, credit unions, and other lenders to provide loans for said entrepreneurs and small business owners. If you are in the process of buying a business but need to determine if an SBA loan is right for you, consider asking yourself these simple questions:
1. Is it a small business?
If your business has less than 250 employees, it may qualify as a small business, meeting the requirements for an SBA loan.
2. Is the business for profit?
This may sound straightforward but in order to apply for an SBA loan, you must be buying a US-based, for-profit business in an eligible industry.
3. Is your industry eligible?
The only ineligible industries are:
- Political or lobbying efforts
- Life insurance companies
- Profit acquired by gambling
- Medical research
- Shopping centers and flea markets
4. What is your credit score?
Although you are applying for a business loan, both your personal and business credit scores must be in good standing to qualify.
5. Can you afford collateral?
Not all lenders require collateral but they do want a personal guarantee. In many cases, the collateral equates to 20% or more of the business. You need to ask yourself if you are in a position to guarantee that should anything happen once your new business has been purchased.
SBA loans are one of the best options for funding your business or entrepreneurial ideas because of their low-interest rates, long terms, and highly manageable monthly payments. Understandably, you might be interested in applying for an SBA loan. There is no time like the present, so speak to a Transworld Business Advisors team member today to determine if an SBA loan is right for you.