This entry is concerning the Approach to your Bank for a Loan, even if you are looking at an SBA Loan. Always start out asking the Bank for a Conventional Loan ( a regular Real Estate, Equipment, Inventory, or Working Capital Loan). The Bank should be the one to decide on a SBA Loan requirement for your loan. The SBA does not loan money itself anymore. It did loan money at one time but now the SBA only guarantees the loans that it is involved with, (an exception is the SBA 504 Loan which is for Fixed Assets Only – Real Estate, Equipment – useful life of 10 years, and related Furniture Fixtures, Installation of Equipment and costs associated with the Real Estate Purchase and the SBA only lends up to 40%). Usually the SBA Guarantees the Bank Loan up to a certain amount. This can be 75% up to 90%, (90% only under certain conditions),of the bank loan at any time during the loan. The Bank calls the shots and has to want to make the loan under the SBA conditions and requirements.
The bank may bring up the need for the SBA Loan and inform you that this SBA Guarantee is the only way the bank will make a loan to you. Usually there is a reason like: not enough collateral for the loan, down payment too low, the asset to be bought with the loan is risky in its resaleability, you are a new business, your business had a bad year, your credit is not high enough for the bank, etc. Sometimes the bank will just decline the loan. You need to present the loan as a straight bank loan but let the banker know that you would like to know if there is any other ways to make the loan.
Always look at several lenders. Some banks do not lend in certain Industries like Restaurants, Recreation, etc. Some banks do not like to make loans with a SBA Guarantee. Some banks may have internal problems that exclude it from making loans of certain types by their regulators. Always look at several Lenders!