The answer…it depends. People contact me daily with this very question. It is often when a client is thinking about starting up a business and they have read on the internet or heard from a friend that they need to get a SBA loan and get some of that “free government money”. The other half are current businesses that are looking for money and when they were turned down by their local bank the person in the branch told them that they need to get a SBA loan.

In both of these scenarios that I most frequently see, it is an eye opening experience. The SBA is not an end all solution and the SBA is not free government money. So what is the SBA?…and again, is a SBA Loan for you? A SBA loan is nothing but a loan from a lender (typically your everyday normal bank) that is backed with a SBA guarantee. Think of it this way, the bank lends the money and the SBA is like someone that co-signs a guarantee to the bank that you will pay back the loan.

I have been on the both sides of the table, both as a lender and a borrower, as I have done five loans for businesses that I have owned. The number one thing that prevents people from getting through the process it is just the pure amount of information that the borrower needs to get the lender. Some lenders are better than others about getting the information that is needed without overwhelming the customer. Expect a long process with lots of paperwork and documentation, now take that expectation and double it, and for good measure add two or three and then set your expectations.

I don’t want to scare my clients from the SBA, I just want to educate and set realistic expectations. I think it is better to go in with eyes wide open and not get frustrated with what the lender will ask for, and then when it is over you leave the process thinking “that wasn’t too bad” rather than “that was the worst thing ever.” At the end of the day the SBA is a very good avenue for those businesses and situations where standard banking products fail. So for those us that don’t have a rich Uncle to co-sign your business loan, consider using your Uncle Sam to co-sign for you. If you are like me, you try not to stay in contact with your Uncle Sam. If you are willing to let your Uncle Sam get to know you, and then make a commitment to stay in touch with him, then the SBA is for you.