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Loan Prequalification Program
The first steps to securing small business financing start long before loan applications are filled out. Many business owners find that when applying for loans there is a lot of unexpected information requested. Precious time can go by while waiting to find out if a business plan and loan application is complete and viable. Small business' often cannot afford to make mistakes in their applications - and often every day waiting makes a big difference in a business' success. The Prequalification Loan Program through the Small Business Administration (SBA) helps to ensure that prospective borrowers develop feasible loan applications. Successful applicants are given prequalification for a SBA 7(a) loan guaranty. The preparation and assistance provided through this program helps traditionally overlooked small business owners to acquire loans. Borrowers that qualify for this program include: low income borrowers, disabled business owners, exporters, veterans, minorities, rural business and specialized industries. The prospective borrower works with an intermediary to prepare or refine a business plan. An intermediary is an assistance organization that is approved by the SBA. Some intermediaries may charge a fee for their services; however, SBA Development Centers do not charge a fee for loan packaging. The intermediary helps the business prepare a loan prequalification package to be submitted to the SBA. The applicant's credit information is reviewed by the intermediary and a loan analysis of the business is included in the prequalification application. The SBA reviews the application to determine if the business qualifies for a guaranteed loan. The maximum amount for loans is $250,000 with terms, maturities and collateral policies following the standard 7(a) loan program. The SBA uses the same methods of approval for a Prequalification Loan as are implemented for the 7(a) loan. The prequalification program is designed to specifically help the small business owner by speeding up the lender consideration of the loan. For prequalification, the business must be 51% owned by an eligible applicant. The business must also follow the SBA Size Standards and operate for profit. Once approved, the SBA issues a letter of prequalification that states the SBA will guarantee the loan under certain terms and conditions. The intermediary then helps the borrower to find a lender offering the most competitive rates. The applicant will then take the letter and loan application documents to a commercial lender for a loan decision. The applicant can be assured that their business plan and applications are in order, and that the lender will view them as already have SBA approval. The SBA Prequalification Loan program
furnishes applicants with the peace of mind that everything is in
order before they approach a commercial lender for a business loan.
Many owners establishing new businesses do not have a prior business
ownership background. The assistance provided by SBA intermediaries
helps not only the businesses secure immediate financing, but also
educates the business owner in preparing for future lending. When
contacting a lender for a business loan, it can feel secure to know
that you are prepared for anything they ask of
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