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SBA expands loan program
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July 16, 1998: 4:55 p.m. ET
Initiative permits small business owners to pre-qualify for a commercial loan
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NEW YORK (CNNfn) - The Small Business Administration is expanding a program designed to increase lending to women and minorities, Vice President Al Gore announced Thursday
The new SBA Pre-Qualification Loan Program, which will be available nationwide, lets small business owners pre-qualify for a loan backed by the SBA before approaching a commercial lender.
The initiative combines and expands the SBA's current minority and women's pre-qualification programs to include veterans, exporters, certain specialized industries and rural small business owners.
"For all our progress, we know that too many Americans never get into the winner's circle of this new economy," Gore said. "I believe we must use today's prosperity to expand that winner's circle by closing the opportunity gap in our workplaces. This SBA initiative will help."
Under SBA's Pre-Qualification Loan Program, selected non-profit and for-profit groups work with small business loan applicants one-on-one to develop viable business plans and credible loan packages.
If the borrower is found eligible and creditworthy, the SBA issues a pre-qualification letter indicating to lenders the application appears appropriate for an SBA loan guaranty.
The loan applicant takes that letter, along with a completed loan package, to a commercial lender to apply for a loan of up to $250,000 backed by an SBA guaranty. SBA approval decisions reflect normal loan standards and are based on the borrower's key financial ratios, cash flow, business and credit history and repayment ability.
The SBA can guarantee up to 80 percent of a loan up to $100,000 and up to 75 percent of larger loans, with the maximum loan size of $250,000.
"The pre-qualification program was developed to encourage lenders to make small business loans to those small business owners that often have difficulty in obtaining loans," SBA Administrator Aida Alvarez said.
In the usual SBA loan process, applicants apply directly to a commercial lender before seeking an SBA guaranty. The SBA never sees the application unless the lender determines it can approve the loan only with SBA's backing. 
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