Small Business Administration Loans
AH&LA supports loan programs from the Small Business Administration that provide necessary sources of funding for new and existing businesses, sources that are unlikely to be found elsewhere.
The Small Business Administration (SBA) provides many services to small businesses. One of the most important services is to provide a Federal guarantee to small business loans. The SBA provides a 7(a) loan, which is their regular loan guarantee program. The 7(a) loan program guarantees loans to small businesses that are unable to obtain financing on similar terms in the private credit market, but can demonstrate the ability to repay the loan.
In order to get a 7(a) loan, the applicant must first be eligible. Repayment ability from the cash flow of the business is a primary consideration in the SBA loan decision process but good character, management capability, collateral, and owner's equity contribution are also important considerations. All owners of 20 percent or more are required to personally guarantee SBA loans.
SBA's 7(a) Loan Program has a maximum loan amount of $2 million dollars. SBA's maximum exposure is $1.5 million. Thus, if a business receives an SBA guaranteed loan for $2 million, the maximum guaranty to the lender will be $1.5 million or 75 percent. For more information on 7(a) loans, click on the link which will take you to the SBA 7(a) Webpage.
The SBA also provides Economic Injury Disaster Loans (EIDL) to small businesses located in a declared disaster area. The amount of money that the SBA will lend will be based upon the actual cost of repairing or replacing a home and/or personal property, minus any insurance settlements or other reimbursements or grants. The total loan amount is subject to these limits. Loans of $14,000 or less do not require collateral. Loans in excess of $14,000 require the pledging of collateral to the extent it is available. For more information on these loans, click on SBA’s EIDL Webpage.
The President's Fiscal Year 2009 (FY2009) budget asked for $17.5 billion in guaranteed 7(a) loans for small businesses’ working capital and other business expenses, a 29 percent increase over 2007 lending.
The President’s FY 2009 budget also asks for $1.1 billion in 2009 direct loans, the normalized 10-year average loan volume, as well as disaster program improvements initiated in the aftermath of the 2005 Gulf Coast hurricanes.
AH&LA supports both these funding requests.
For more information, contact AH&LA senior vice president for Governmental Affairs Kevin Maher at (202) 289-3147,
kmaher@ahla.com.(Updated August 2008)