The U.S. Small Business Administration (SBA) is offering two new loans – Small Loan Advantage and Community Advantage – that are aimed at getting modest loans to small businesses quickly. The SBA is looking to strengthen the connection between entrepreneurs and small business owners, and the resources that the SBA can provide. These loans are geared to businesses and entrepreneurs that need an infusion of funds for working capital and/or purchasing real estate or equipment.
The Small Loan Advantage’s biggest upside is that it has the potential to be approved in minutes due to significantly reduced paperwork. In the past, one reason big banks would not administer smaller loans is because of the costs concerns with time and resources. An electronic option to apply for this loan will also reduce unneeded costs for lenders.
The Community Advantage aims to lend to underserved communities such as women-, minority-, and veteran-owned businesses, as well as to businesses located in low income areas.
Both programs are expected to be available by mid-March 2011.
The Small Loan Advantage and Community Advantage are loans under the general scope of the 7(a) Loan Program that the SBA provides to businesses for special requirements. 7(a) loans are the most basic and most commonly used type of loans. They are also the most flexible, since financing can be guaranteed for a variety of general business purposes, including working capital, machinery and equipment, furniture and fixtures, land and building (including purchase, renovation and new construction), leasehold improvements, and debt refinancing (under special conditions). Loan maturity is up to 10 years for working capital, and generally up to 25 years for fixed assets.
Most American banks participate in the program, as do some non-bank lenders, which expands the availability of loans. Participating lenders agree to structure loans according to the SBA’s requirements, and apply and receive a guaranty from the SBA on a portion of this loan.