Contrary to popular belief, the Small Business Administration does not actually provides you with the funds necessary in order to launch your business operations. Instead, the SBA provides your lending bank with a specific guarantee as it relates to them providing you with a loan for your business purposes. Typically, this federal organization – created under the Small Business Act – works as a cosigner on your behalf in order to receive the funding that you require. This is primarily due to the fact that the small business administration works with your bank to ensure that if you default on your loan that they will receive 80% to 90% of their financing back. This is one of the strongest reasons that many banks are willing to provide small business loans to specific types of businesses.
One of the things that you should be very much aware of is the fact that these financing companies are looking to generate the highest return on their risk capital as it relates to small business operations. As such, if you are able to completely understand how the SBA operations then you will be in an excellent position to receive the financing that you need on an ongoing basis. Most importantly, it is imperative that you have an appropriate business plan that will showcase the risks, profit and loss statements, cash flow analysis, balance sheet, breakeven analysis, and other financial models that ensure that you will be able to remain profitable and cash flow positive at all times. If you are uncertain as to how to develop this financial model then we strongly recommend that you work with a certified public accountant or other qualified business advisor as to how you can receive the financing that you need with minimal hassle.
As stated above, it is of the utmost importance that you understand exactly what your local financial institution is seeking as it pertains to provide you with a business loan that is secured by the Small Business Administration. We are going to continue to provide you with new insights as it relates to how you can effectively develop a business plan, business proposal, and SBA loan presentation package that will ensure that you receive the appropriate review from your financial institution.
As always, we strongly recommend that you work closely with your certified public accountant, attorney, SBA loan consultant, or other advisor as it pertains to this matter. They will be an invaluable source of information as it relates to how you can sure this type of financing in order to expand your small business.