SBA Loan Guaranty

The U.S. government funds the SBA, allowing it to provide guaranties of small business loans from lending partners. The SBA does not lend its own funds. Rather, small business loan funding is given by independent lenders who are provided with the credit backing of the United States government through the SBA loan guaranty program.

The SBA loan guaranty program is built on a set of guidelines that each small business borrower must meet. The SBA's loan guaranty requirements can change based on changes to the fiscal policy of the United States. The loan guaranty provided by the SBA transfers the risk of borrower non-payment, up to the amount of the guaranty, from the lender to the SBA. Therefore, when a franchisee or small business owner applies for an SBA loan, they are actually applying for a commercial loan which is structured to meet SBA requirements so that it receives an SBA guaranty.