Qualifying For Government Small Business Loans

In 1953, the US government created the Small Business Administration (SBA) to serve the needs of small business, including providing government small business loans. With today’s credit crunch, the SBA can be and frequently is the last chance for small businesses looking for government loans. The good news is that, while banks (particularly large banks) are being tight-fisted, government loans that are available to small businesses are plentiful.

Today there are several government loans available to fit the needs of virtually any small business. And while larger banks have been holding tightly to their money, government loans through the Small Business Administration are still widely available. Not only that, but the lending institutions that originate the most common type of government loans aren’t allowed to charge “points” or balloon payments on those loans – making small business loans from the government more affordable.

There is a wide variety of small business loans available, too. You can use government loans to start your business, take care of cyclical expenses, and deal with emergencies. There are loans for women and minority entrepreneurs and for entrepreneurs who are veterans, and loans for those in certain kinds of businesses, like exporting.

Small business loans are issued in widely varying amounts, from under $250,000 to under $35,000.

So how does your small business qualify for a government loan? Many of the documents you’ll need will be familiar if you’ve ever gotten a mortgage; others are unique to government issued loans.

The following are among the documents you’ll need to qualify for these loans, taken from Business.gov, a Web site that is “The Official Business Link to the US Government” and with government loans:

• First, to qualify for small business loans issues by the government you’ll need an SBA loan application. Your lending institution also has to submit an application to the SBA for your loan.

• You’ll need to fill out forms about your personal background and personal finances to qualify for a government loan.

• Obviously, the government will want to know about the progress of your small business so far. You’ll need to provide financial statements and projected financial statements to qualify for your government loans.

• In order to qualify for small business loans through the SBA, you have to be unable to obtain funds “on reasonable terms” from a bank or other private source. Therefore, the SBA requires a loan application history from you to qualify your small business loan.

• Other documents you’ll need to help qualify you for government loans include your resume, a business overview, your own personal tax returns (for 3 years), and your business tax returns (again for 3 years).

It’s important to note that the federal government isn’t making small business loans directly. Rather, like student loans, small business loans are loans that the federal government guarantees will be paid back. Just remember that, like taxes (and student loans), the government will want to be repaid for any loans it provides.

The process of qualifying for government small business loans can seem daunting. You may need to go a bit further to qualify for these loans than you may have to for private loans. On the other hand, government loans are frequently less expensive than private loans. And in today’s economy, small business loans may well be your best bet for starting and running your business.