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SBA Loan Guarantees

The SBA offers private lenders a guarantee on loans made to qualified small businesses. If the borrower fails to pay the loan, the lender can usually obtain up to 85 percent of the outstanding loan principal from the SBA. Loans to assist small businesses in exporting are even be eligible for a 90 percent guarantee and some loans for inventory have a 100 percent guarantee. The government guarantees encourage lenders to grant credit that otherwise would not be available on reasonable terms and conditions. Commercial lenders often prefer a SBA-guaranteed small businesses loan because the federal guarantee not only reduces the lender's risks, but the bank will, going forward, have a readily available secondary market in which to sell the guaranteed portion of the loan. In addition, the guaranteed portion of the loan does not count against the federally mandated reserve funds that banks must maintain as protection against loan losses.

What are the most popular SBA loan guarantee programs? We discuss:

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