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The Three Biggest Myths About the S.B.A.

June 25, 2012 | Small Business Loans

Last week the New York Times published an article on three big myths about the Small Business Administration. We definitely think it is worth the read in full [click here to jump to the article], but here is a quick synopsis if you don’t have the time…

Myth: The SBA Lends Money.

Truth: The SBA provides a government guarantee to banks to lessen their risk for lending out money to a small business owner. The SBA doesn’t actually provide the funding for the loan whether it be a 504 loan or a 7(a) loan. It is a partnership between banks and the SBA that helps to provide the borrower a lower interest rate that is locked in for the full life of the loan.

Myth: When the SBA Guarantees a Loan, There is No Need for Collateral.

Truth: As Ami Kassar put it, “The government is guaranteeing a large percentage of the loan, but it will honor that commitment only if the borrower is willing to put his or her neck on the line, too. I think this is fair.”

Myth: SBA Loans Are as Easy to Get as Other Commercial Loans

Truth: A government backed loan will require some due diligence on the part of the SBA, the bank and the borrower. Here at CDC Small Business Finance we try our hardest to eliminate any duplication in the paperwork process by keeping direct contact with our lending partners during the entire loan process. There are a lot of overlapping requirements for a bank loan and an SBA loan so it just makes sense to us to work this way. We take on the complexity of the loan so you don’t have to. We want you to focus on your business. We’ll focus on doing our part, the SBA loan.

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