3 Things To Know About The SBA Loan with Howard Bank’s Rosa Scharf
Funding is an important part of getting a business off the ground and there are many options available. One of the options a business may consider is the SBA (Small Business Administration) loan.
The SBA does not act as a co-signer if you default on your loan: If you happen to default on your SBA loan, know that the government will not step in and pay the bill. In fact, the SBA doesn’t actually lend money its self–“it supports the bank’s lending efforts,” Rosa says. The SBA’s guarantee “helps the bank offset some of the risk associated with small businesses” and in the event of a default, the borrower is still responsible for a large amount of the loan (the SBA will cover a certain percent after the borrower liquidates assets).
Your personal credit DOES impact your loan approval chances: “The SBA has a lot of different lending criteria [and] the biggest one is the character. reputation and credit history of the applicant,” Scharf says. “So they look directly at the credit history.” While your credit is a factor in approval, bad credit doesn’t necessarily mean a denial. “If there’s noise [a bankruptcy or delinquency] and we can explain it, we can typically move forward.”
You can get an SBA loan for more than equipment: Some may think that you can only get an SBA loan to purchase equipment for your business but did you know you could get one to improve cash flow? You can even get an SBA loan to buy a building for your business. Rosa suggests visiting the SBA website for a full list of SBA loan uses.
For more information on SBA lending, listen to Rosa’s full interview. Stay tuned to MyCity4Her Radio for part 2 of Rosa’s SBA lending breakdown on January 29 at 10:30am EST.