Qualifying for SBA Handicapped Assistance Loans with Bad Credit

The SBA works through a lender’s network of banks to provide needed funding to small businesses, and can offer loans to businesses with bad credit. The SBA, which is the U.S. Small Business Administration, does not provide loans or funding directly to small businesses. 

SBA Loan Guarantees

The requirements for a SBA loan guarantee are set by the SBA and the lender and includes credit and financial qualification as well as a demonstration of the business’s ability to pay back the loan under its terms and conditions. The only exception to the rule regarding SBA loans made directly are disaster relief loans that the SBA provides in connection with a hurricane, fire or tornado that devastates a business or community.

Elimination of HAL Program Funding

The funding for Handicapped funding has been eliminated by the U.S. Congress as its funding has been added to the SBA 7(a) Basic Loan Program and 504 community development program.  The handicapped assistance program consisted of the HAL-1 and HAL-2 programs.

The HAL-1 provided assistance to small business whose business was performed by at least 75 percent of a handicapped employee workforce. HAL-2 provided funding for a small business owned by a handicapped person.  A small business could qualify for a loan of up to $150,000 borrowed at a rate as low as 3 percent.  The HAL loans were made available to businesses that met the qualifications for the loans and other requirements that were set by the lender. These requirements included credit and financial underwriting.

Use of a Guarantor or Co-Signer

Having bad credit may not automatically disqualify a small business for a SBA loan guarantee provided through a private lender.  In some cases, a small business serving handicapped employees or owned by a handicapped individual with bad credit may be able to meet other requirements for the loan or use a guarantor or co-signer to qualify for the loan.

Contact a Lender

A small handicapped business with bad credit that seeks to acquire funding through the SBA loan guarantees (7(a) or CDC/504) should contact a lender participating in a lending network in order to ascertain their qualifications.  This includes seeking alternative qualification criteria and finding ways to improve their credit situation in order to meet the program requirements for funding.

Also, a handicapped business employer can contact the SBA directly for more information about lenders that offer similar financing programs.