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The US Small Business Administration has several loan programs. You can
use the loan for a number of things, including working capital, rent, equipment,
inventory, supplies, and materials. If you are applying for start up
financing, be prepared to have 30-50% of your own money to bring to the deal.
You must also have been turned down by at least one commercial lender. SBA
only sets the guideline for the loans, banks are the lenders. SBA
guarantees the loans to reduce the risk to the lender.
The interest rate on these loans varies, depending on the term of the loan
and how the funds are to be used. The terms range from five to twenty five
years, and the interest rate may not exceed the prime rate plus 2.75%
Even though the SBA-qualifying standards are more flexible than other types
of loans, lenders will generally ask for certain information before deciding to
use an SBA loan program. Generally, a business will need the following
documentation to evaluate your loan request:
- Business profile. A document describing type of business, annual sales,
number of employees, length of time in business and ownership.
- Loan request. A description of how loan funds will be used. Should
include purpose, amount and type of loan.
- Collateral. Description of collateral offered to secure the loan,
including equity in the business, borrowed funds and available cash.
- Business financial statements. Complete financial statements for the
past three years and current interim financial statements.
- Personal financial statements. Statements of owners, partners, officers,
and stockholders owning 20% or more of the business.
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