Are you ready for this? In a truly innovative move, Congress is proposing to let the Small Business Administration pre-qualify your small business for a loan. I’m not kidding. If this ever becomes a common occurrence, you can imagine how it will dramatically change the face of small business lending.
We all know the drill. When applying for a home loan or credit card, for example, you can be pre-qualified. This means someone is checking your income, credit, business history, and the like to make a preliminary decision. If you’re pre-qualified, you are assured to get a loan when you finish filling out the mounds of paperwork. A similar process works with a small easy working capital business loan.
Under the SBA loan program, all loans are made (with the exception of FEMA disaster loans and the Microloan program) by private SBA licensed lenders. They made the decisions and do the pre-qualification. But there’s always doubt in the mind of a lender as to which borrower should be approved. Remember SBA lenders are audited frequently and their decisions, especially if there is a default, can be critiqued. So the SBA is going to step in and make the decision for the banks.
This novel program is expressed in Section 111 of the Small Business Credit Expansion and Loan Markets Stabilization Act of 2009. There is budgeted a department of 250 Federal workers who will collect all the information and determine creditworthiness. If approved, you will be placed on a list which is made available first to lenders within 100 miles of your principal place of business. If no one bites off, it can then being disseminated to preferred lenders throughout the nation.
But it’s even better. If no lender opts to make a loan, the SBA themselves will directly loan monies to you. It cannot be emphasized how substantial a change this is. The SBA simply does not make direct loans other than those in a disaster area.
And, there is an SBA loan program in effect that is delivering the goods to small businesses. Believe it or not, there is a loan program out there and SBA lenders are actually making loans currently: the Community Express Loan Program. This gives unsecured small business loans between $5,000 and $50,000 with very little paperwork, answers typically in two days, interest rates presently at 7.75%, funding and two weeks, and monies wired directly to your business account. There are still lenders participating in this program.