The Basics Of How To Run A Successful Business - SBA Loans

Microloan Program:

The MicroLoan Program makes funds available to nonprofit community based lenders which make loans to eligible borrowers in amounts up to $25,000 with a maximum term of six years. Terms may however vary due to loan purpose and size.

Although most small businesses are eligible for SBA loans, some types of businesses are ineligible and a case-by-case determination must be made by the Agency. Your eligibility for the SBA loan is usually determined by these factors:

Type of Business

The applicant companies must be for profit, do business in the USA, have sufficient owner equity, and use other financial resources initially including any personal assets.

Size of Business

The Small Business Act states that an eligible small business for the program is an independently owned and operated company. The SBA has developed firm size standards in order to define the largest size of a small business for SBA loans.

Use of Funds

The funds from SBA loans can be used for virtually any legitimate business purpose. Funds from an SBA loan cannot be used:

  • To finance a product floor plan
  • To buy real estate where the borrower has issued a commitment to the developer or builder, or where the property will be held for investment purposes
  • To pay current owners or delinquent taxes of payroll withholding
  • To pay off current debt unless it can be demonstrated that the act will benefit the company.

Proceeds of an SBA loan cannot be used:

  • To finance floor plan needs
  • To purchase real estate where the participant has issued a forward commitment to the builder / developer, or where the real estate will be held primarily for investment purposes
  • To make payments to owners or pay delinquent withholding taxes
  • To pay existing debt unless it can be shown that the refinancing will benefit the small business and that the need to refinance is not indicative of imprudent management. Proceeds can never be used to reduce the exposure of the participant in the loans being refinanced.

Special Circumstances

Franchises are generally eligible except in cases where a franchiser retains control over operations to the point where it's not as much a franchise as an employment contract.

Where To Go

Even though attaining a loan is a simple process after all requirements are in place, the ability to decide on what loan and how to organize research may be a difficult task. Working with a loan officer to decide on loans is a way to minimize aggravations. Also, you can learn how to write an effective business plan at a local Small Business Development Center (SBDC). There are programs that are half funded by the SBA and local community colleges and/or municipalities. At SBDC, you can take a course for writing a business plan for around $150, and they also provide free consulting.

Another place to go for more information and assistance is the SBA Web site www.sba.gov where you will find an entire online library of facts on loans, classes available and other resources.

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cpa profile image

cpa 6 years ago from Brooklyn, NY

Thumbs up - great hub.

Take it from a CPA - people need information like this.


Hal Licino profile image

Hal Licino 6 years ago from Toronto Author

Thank you! I appreciate the kind words! :)

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