A SBA loan guarantee can mean the difference between getting a bank loan and being entirely shut out. This federal agency loans no money itself, but instead guarantees 75 percent of individual loans made by private lenders, up to $750,000 (making the maximum loan amount $1 million). But a business must first show that it cannot obtain conventional financing on its own.

When you are starting up a business, there are a many costs. When you go to a bank to ask for a loan, they need sufficient collateral from you or your request will be rejected. This is where many entrepreneurs encounter stumbling blocks: not enough collateral. This is when the SBA may help.

When utilizing the SBA’s services, business owners must personally guarantee SBA loans. This means that you must put your own personal finances up as collateral to the SBA, saying that you will be responsible for the cost of the loan no matter what. All owners of twenty percent (20%) or more are required to personally guarantee SBA loans so be sure to let any partners know about the SBA guarantee and how they could be affected if the business defaults. You must also show cash flows sufficient to repay the loan. These are the biggest stipulations of the SBA, but they also consider good character, management capability, and owner’s equity contribution.

Most commercial banks offer information about SBA loans and many participate in the SBA guarantee program. Ask your banker or local Small Business Development Center (SBDC) representative for more information. You can also access the Small Business Administration Loan Program on-line at: http://www.sba.gov/financing/fr7aloan.html

The SBA offers a pre-qualification program for women business owners (and minority business owners too). Currently, this is a pilot program that assists women borrowers in developing viable loan application packages and securing loans. This service reviews your business plan and acts as a go-between for you and the bank. If the pre-qualifier gives you a green light, so will your bank

Once the loan package is assembled, it is submitted to the SBA for expedited consideration; a decision usually is made within three days. If the application is approved, the SBA issues a letter of pre-qualification stating the SBA’s intent to guarantee the loan. The intermediary then helps the borrower locate a lender offering the most competitive rates. Intermediaries (usually small business development centers) may charge a reasonable fee for loan packaging.