So when you’re looking at institutional lenders for your business, there’s a couple of different kinds of loans that you may be able to obtain. Probably the one that applies most often would be an SBA loan. SBA stands for Small Business Administration.
There are a lot of banks that have a niche market in SBA lending. They target small businesses as their customers and they will extend these loans to them through the SBA program. This SBA program is very helpful to small businesses in obtaining credit because what happens in that loan is the Small Business Administration basically guarantees a portion of the loan. The bank’s risk in lending capital to your business is reduced because if you go belly-up, they’re not at a complete loss. The SBA is going to step up and pay a portion of that loss that the bank has as a guarantor.
It dramatically reduces the bank’s risk in lending to small businesses if they’re able to make the loans through the SBA program. There are certain guidelines that you have to qualify for or fit within in order to receive SBA financing. And that is a subject that we could speak on at great length. Suffice it to say, it’s an issue that you wan to advise your counsel or get the advice of your counsel on. And it’s also something that you can discuss with your banker.
I find it’s very helpful to have a relationship, and I know how this stuff works, and so they can help you set your business up so that you will qualify for this type of a loan program.