The Small Business Adminstration was founded in 1953 and primarily serves to counsel, assist, and protect the interests of small businesses. It's a government agency, but as formed partnerships with other public and private organizations in order to deliver as many services as possible. One such service is providing loans to for small businesses in the US, Puerto Rico, Virgin Islands, and Guam. Loans are provided through SBA approved lenders throughout the US and are very similar to any other business loan, save that they are guaranteed by the SBA. Let's look at just one aspect of the SBA loan program today: interest rates.
Interest rates on an SBA loan can be fixed or variable and are based on the current Prime Rate (which is a set rate based partly on the Fed Fund Rate and is standard across all lending institutions). Other requirements for interest rates are:
Variable rate loans are generally tied to either the lowest prime rate or the SBA optional peg rate, which is a weighted average of rates that the government pays for loans similar to the average SBA loan (the SBA optional peg rate is calculated quarterly and is published in the Federal Register). Together, the lender and borrower negotiate the additional amount which will be added to the base rate, and an adjustment period is chosen. This adjustment period determines when and at what frequency the rate will change. It must be no more than monthly and must be consistent.
Due to clear and competitive interest rates on their products and its invaluable assistance when it comes to securing a business loan itself, the SBA can be a valuable resource for any current or prospective business owner. To find out more about the SBA and its loan process, please visit www.sba.gov