SBA Loan Programs for Employee Trust Companies: Requirements and Qualifications

In order to qualify for most SBA loan programs, employee trust companies are obliged to meet a general set of four requirements. These SBA loan requirements include the trust company's size, the type of business it is, the intended use of the proceeds, and the availability of funds from other sources. Once each of these conditions are judged to be in accordance with SBA regulations, the company qualifies for certain loans or, rather, loan guarantees.

Does Size Matter?

In the case of acquiring admission into an SBA loan program, the size of one's small business does in fact matter. While determining the size of a business is conditioned by SBA standards and practices, the qualifying size of a business is decided on a case by case basis.

Why Was My Business Rejected?

SBA loan programs reserve the right to reject categorically the applications of certain types of businesses. The basic conditions that the SBA requires of its applicants is that they be for-profit companies that are presently engaged in or proposing to do business in the United States. Furthermore, they must have reasonable owner equity to invest and should have used every other alternative financial resource first. This includes both the business and personal financial assets of the applicant.

Above and beyond these basic criteria are more specific, categorical types of businesses that qualify for SBA loan programs. Examples of these business types are franchises, recreational facilities and clubs, farms and agricultural businesses, fishing vessels and medical facilities. Loosely falling under the regulation umbrella of qualifying types of business are instances of change of ownership where the SBA judges that the respective business will benefit from the change.

But It's My Money

The third basic requirement for SBA loan program qualification concerns the intended use of the proceeds. The acquired finances are meant to be utilized to establish new businesses or to procure or expand an existing one. This general rule can be expanded to include buying land or buildings, new construction, expanding or converting existing properties, purchasing equipment, furniture, fixtures and supplies. The procured funds can also be used to refinance an existing business's indebtedness, contract performance or for export production.

However, there are ways in which these employee trust companies are not allowed to utilize the acquired loan. For instance, companies may not refinance an existing debt where the lender is positioned to sustain a heavy loss. For this would simultaneously place the SBA in a position to take over that loss. The loans may not be used to effect only partial changes in ownership. Nor may they be used to repay delinquent state or federal withholding taxes or other funds that should be held in trust.

I Don't Have Funds Available

The final basic requirement for SBA loan program qualification is that the business has already exhausted every other alternative possibility for obtaining the requested financing. Alternatives include not only business assets but the personal assets of those individuals involved in the company as well.