What is a SBA Loan?
SBA Loans are bank and commercial lender loans provided to new and existing small businesses that are backed by the US Small Business Administration. The motto of SBA lending is to offer financing for small companies that were not able to secure traditional bank financing. The bank or SBA lender provides enhanced financing to the small business, while the government agrees to shoulder the great majority of the lenders’ losses should the small business default on the loan. In theory, by reducing the risk of the lending institutions with the SBA guarantee, the banks and lending institutions are more likely to approve loans they would not normally lend. Since the government is taking the majority of the responsibility of risk factor here with this type of financing, the SBA requires small businesses and the commercial lenders to comply with certain guidelines before they get an SBA guarantee approved before funding.