Small Business Administration Lending Basics

Who is eligible for an SBA Loan?

Although most businesses are eligible for SBA loans, some types of businesses are ineligible and a case-by-case determination must be made by ViewPoint Bank. Eligibility is generally determined by three factors:

Type of Business

The vast majority of businesses are eligible for financial assistance from the SBA. However, applicant businesses must operate for profit; be engaged in, or propose to do business in, the United States or its possessions; have reasonable owner equity to invest; and, use alternative financial resources first including personal assets.

Size of Business

The Small Business Administration defines an eligible business as one that is independently owned and operated and not dominant in its field of operation. The SBA also states that in determining what is a qualified business, the definition shall vary from industry to industry to adequately reflect industry differences. The SBA has therefore developed size standards that define the maximum size of an eligible is determined by either revenues or number of employees. ViewPoint Bank can help you determine eligibility.

Use of Proceeds

The proceeds of SBA loans can be used for most business purposes. These may include the purchase of real estate for business operations; construction, renovation or leasehold improvements; acquisition of furniture, fixtures, machinery, and equipment; purchase of inventory; and, working capital. Keep in mind, SBA Loan proceeds cannot be used to finance floor plan needs; to purchase real estate where the participant has issued a forward commitment to the builder/developer, or where the real estate will be held primarily for investment purposes; to make payments to owners or pay delinquent withholding taxes; to pay existing debt unless it can be shown that the refinancing will benefit the small business and that the need to refinance is not indicative of imprudent management. (Proceeds can never be used to reduce the exposure of the participant in the loans being refinanced.)

What is the Small Business Administration looking for in a business?

Repayment ability from the cash flow of the business is a primary consideration in the SBA loan decision process but good character, management capability, collateral, and owner's equity contribution are also important considerations. All owners of 20 percent or more are required to personally guarantee SBA loans. Start-up businesses might also be considered.

How much can you borrow typically with an SBA Loan?

Effective December 22, 2000, a maximum loan amount of $2 million has been established for 7(a) loans.

Who do you contact for more information?

Contact a ViewPoint Bank Business Lending Officer, for further information and assistance in the SBA loan application process at 972-801-5775. ViewPoint Bank has a Packaging Group that can make an SBA application painless and expedient, as well as help with a business plan.