New Rules Make SBA Loans Easier to Obtain

how to obtain sba loan

­

New Rules Make SBA Loans Easier to Obtain

If you’ve ever attempted to apply for an SBA loan, you know the process has never been simple. Until now. (Well, simpler, anyway) The Small Business Administration recently implemented new policies that will remove some of the restrictions on a few of its loan programs. These changes make the process easier for borrowers like you, and make it easier for banks to be flexible in the way they structure loan products for business owners.

Which Loans are Affected?

Not all SBA loans are affected by the changes. But the 7(a) and 504 loan programs are. If you’re not familiar with these, here’s an overview:

The 7(a): is SBA’s basic loan program, where the financing is usually provided fully by a bank. The SBA pays back a portion of the loan if the borrower defaults.

The 504: used for real estate or machinery purchases. There’s a split in who pays the loan between a bank and a Certified Development Company.

So What are These Amazing Changes?

In the past, the SBA required you to share information about your personal wealth and assets. If you had a lot of it, you might have been turned down for a business loan. Now there’s no “personal resources” test that could disqualify

you for an SBA loan if your wealth is above a certain threshold.

With the 504 loan program, in the past, whatever property a business wanted to purchase with the loan was required as collateral for the loan itself. So if you used the loan to buy machinery, that was your collateral. Now businesses can use other types of collateral, including expected payments or other physical assets. This could provide better terms and lower interest rates on those loans.

Another change that business owners will be happy of is an extended period for project expenses that can be covered by a loan. So if you were applying for a 504 loan and wanted to include project expenses you’d already incurred, like a permit, you might not have been able to include it before if it was purchased more than nine months before you applied for the SBA loan. Now, as long as an expense is tied to the project you’re trying to get a loan for, the loan can cover it, no matter when it was incurred.

There’s more involved in the new rules, so I encourage you to read up on them yourself. But suffice it to say, these relaxed regulations will entice more small businesses to apply for loans, which could be a great booster for our economy.

Source: blog.corpnet.com

Category: Credit

Similar articles: