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Are SBA Loans Easy Money?

Simplifying processes and paperwork is a beautiful promise that the U.S. Small Business Administration is delivering upon. Cutting through red tape, the agency has been able to get rid of redundant paperwork, but more importantly, in some loan programs, to make borrowing easier. In September 2011, for example, the government agency introduced a reengineered CAPLines program, a revolving line of credit that is now easier to obtain.

  • CapLines Program – Business owners can pledge accounts receivable, inventory, contracts, and even purchase orders to obtain a low-interest loan to finance contracts, subcontracts, and purchase orders (owners no longer need to use personal assets as collateral to obtain a line of credit). The loans are intended for use in hiring more workers or buying materials, among other capital needs.[1] According to the National Economic Council’s May 2012 report, Moving America’s Small Businesses and Entrepreneurs Forward, the streamlining resulted in 220 percent more approvals in the working capital financing program.
  • Disaster Loans – There’s less red tape to obtain disaster loans too. The application process used to guide online applicants through 80 screens, based on their responses. Now if you need a disaster loan for your business, you will fill out a three-page form online, and it’s identical to the paper form.[2]
  • Mortgage and Fixed Assets Refinancing – Easier to obtain because of a short-term boost in lending rather than a streamlining of processes, the 504 Refinance Program provides money at below-market rates for a fixed, long-term loan against business assets.  As part of the Small Business Jobs Act, this program expires September 27, 2012. The borrower can finance up to 90 percent of the value of the property, and can “cash out” proceeds from the refinancing to pay for eligible business expenses, including payroll, inventory and accounts payable. Debts are eligible to be refinanced if all payments are current, no payment in the last year was past-due by more than 30 days and the loan is at least two years old.[3]
  • SLA 2.0 – This program is for small loan amounts, up to $350,000, using a network of lenders other than the Preferred Lender Program (Newtek Business Services is a Preferred Lender, handling SBA 7[a] and 504 loans). The intent is to get more loans available at the community level. After the Small Loan Amounts program’s initial year in 2011, the government relaunched it as SLA 2.0 in June 2012. Changes make it easier to apply and easier for lenders to process the loans.[4]

So, easy money? Well, maybe not, but certainly the government’s Small Business Administration is easing access to money.  That’s a definite move in the right direction.


[1] CAPLines Fact Sheet

[2] Disaster Loan Application

[3] 504 Loan Refinancing Program

[4] Priming the Lending Pump for Small Business 2.0

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