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SBA- Guaranteed Loans

SBA- Guaranteed Loans. By: John Clayton a nd Nick Tully. Description.

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SBA- Guaranteed Loans

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  1. SBA- Guaranteed Loans By: John Clayton and Nick Tully

  2. Description • SBA- Guaranteed Loans are U.S. government-backed term loans that are available at most banks and places the give commercial lending. In any given year, the SBA can guarantee billions of dollars-worth of loans that can support thousands of small businesses. • The loan can last up to 25 years for real estate, and 10 years for equipment.

  3. When Are SBA- Guaranteed Loans Used? • These loans are the SBA’s most frequently used loan program. A guaranteed loan is always one made by a commercial lending institution, which is usually a bank or another larger business with money, to a small business customer. The SBA provides the bank with a guarantee that it will pay the bank a good sized portion of the unpaid balance on loans that are not paid in full by the customer, which is a smaller business.

  4. Relative Cost • There are two rate structures available on SBA guaranteed loans, they are fixed and variable. Variable rate loans can be adjusted monthly, quarterly, semi-annually, annually, and float with the prime rate. Fixed-rate loans do not change. • The maximum allowable rate for both types of loans is 2.75 percent over prime for loans of seven years and longer, and 2.25 percent over the prime rate for loans up to seven years. Loans under $50,000 may have a higher rate. • The SBA’s primary lending program which is the 7(a) Loan Program guarantees up to 85%of loans with a $150,000 value and 75 percent of loans of $150,000+. The maximum amount that can be loaned is $5 million.

  5. Steps to taking out a loan • When looking for banks, ask if they belong to the SBA’s Preferred Lenders Program. • Look for banks that have had the most experience with SBA loans • See who has the best rates. The lower the better. • You have to find a bank that is willing to do the loan you ar looking for. If you need a loan to open a restaurant, then go to a bank that will give restaurant loans. You need to file with a bank, not with the government.

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