SBA Loan: Lifeline For Small Businesses

Small Business Administration makes available loan to small business at a time when lenders are skeptical about providing them business loans due to recession. President Obama has recently asked Congress to equip the SBA with additional funding, even as the government is encouraging an increasing number of small businesses to avail this facility.

The 504 loan program of the SBA allows business owners to avail fixed-rate loan for various purposes, including, facility expansion, buying property or refinancing existing mortgages. The borrower’s contribution is typically as low as 10 percent.

With many small businesses in trouble due to recession, takers for this program have been declining in the recent years. Last year, an amount of $3.8 billion was approved by the SBA. This was down from $5.3 billion and $6.3 billion approved in 2008 and 2007 respectively. The SBA is trying to entice small business with deals like fee waiver and lower interest rates. The strategy has been successful as demand for 504 loan is gaining momentum again.

Certified Development Corporation (CDC) is the authorized government partner, which can advise potential borrowers about lenders offering loan under 504 program, Grady Hedgespeth, director, the SBA’s Office of Financial Assistance informed. The SBA’s website, SBA.gov, also provides this information.

One of the drawbacks of 504 program is the delay in loan disbursal after it has been approved. Small business owners, who opted for this loan, experienced 60-90 day delay. For construction projects, the delay may extend up to one year. Most borrowers need a gap financing to deal with the delay, which may mean pledging additional assets over and above 10 percent.

Similar News:

1. SBA Small Loans Fast
2. Small Business Loan Application for the Flood Victims is Now Open
3. $10 Million Small Business Grant Program Being Offered by Bank of America
4. President Obama Signs Small Business Bill Into Law To Aid Small Businesses
5. Unemployment Rate Might Increase Due to Failing Small Businesses