QandAs: Loans

What is a Government Small Business Loan?

Answer:
Government small business loans provide entrepreneurs and businesses with the needed capital to start or operate a small business.

The Small Business Administration (SBA) does not fund the loans. Rather, private lenders, banks, and credit unions provide the money, and the SBA guarantees or secures the loan.

Government small business loans have helped millions of people, and the money can be used to start or operate a variety of businesses such as beauty salons, restaurants, real estate, consulting firm, etc. Although financial institutions are eager to assist small business owners, government small business loans have strict lending requirements.

To qualify for a government small business loan, business owners must invest some of their personal funds into the venture. Lenders are more confident when an applicant has a personal stake in their business, and these persons are more likely to receive a loan approval. Moreover, loan applicants must submit a detailed business plan. The business plan outlines company description, business strategy, and financial forecast. Before approving a small business loan, lenders need to know the likelihood of success. Lastly, lenders will review an applicant's personal credit history and determine creditworthiness. Individuals with a poor credit history are more likely to default on a government small business loan.