Page 16 - NBIZ Magazine April 2022

IS MY BUSINESS may use a temporary alternative size standard of not more
than $15 million in tangible net worth and not more than
TOO LARGE $5 million average net income after Federal income taxes
(excluding any carry-over losses) of the applicant for the two
full fiscal years before the date of the application.
FOR SBA “small business”. The distinction is important if one wishes
One may take it for granted that his/her company is a

to qualify for SBA financing or register for government
FINANCING? contracting as a small business. In addition to the size
standard requirement, SBA defines a U.S. small business as
a concern that:
• Is organized for profit;
By Bruce Hurta • Has a place of business in the US;
• Operates primarily within the U.S. or makes a signifi-
own a small business. At least we were a ‘small’ cant contribution to the U.S. economy through pay-
business last time I checked. “Do I qualify for SBA ment of taxes or use of American products, materials,
government-backed financing?” or labor;
Is this a question that a business owner should • Is independently owned and operated; and
I be asking? It might be a good idea if one has out- • Is not dominant in its field on a national basis.
grown his/her facilities, and requires financing for a new
office or warehouse building. It might be a good idea if The business may be a sole proprietorship, partnership,
the company has short-term bank debt that would benefit corporation, or any other legal form. When determining
from a longer term and lower payments. It might be a what constitutes a small business, the definition will vary
good idea if one is contemplating buying a business. If one to reflect industry differences i.e. size standards.
owns a “small” business, he/she might be eligible for SBA An SBA loan officer will be happy to research and
government-backed financing. I will clarify what it means confirm one’s business’ size standard eligibility at the start
to be eligible as a “small” business after highlighting the of the loan application process. Chances are pretty good
following reasons for taking advantage of SBA (U.S. Small that one’s business is a “small” business!
Business Administration) financing:
• SBA loans provide permanent, long-term financing. Small businesses make up:
(25 years for small business real estate loans. 10 years • 99.7 percent of U.S. employer firms,
for other small business loan purposes.) Conventional • 64 percent of net new private-sector jobs,
bank financing is typically temporary financing. • 49.2 percent of private-sector employment,
A balloon feature requires the small business to • 42.9 percent of private-sector payroll,
re-qualify to refinance the loan in the future. • 46 percent of private-sector output,
• SBA loans typically have lower down payment • 43 percent of high-tech employment,
requirements than conventional bank financing. • 98 percent of firms exporting goods, and
• SBA loans have easier qualifying criteria than conven- • 33 percent of exporting value.
tional bank loans.
Source: U.S. Census Bureau, SUSB, CPS; International Trade
Administration; Bureau of Labor Statistics, BED; Advocacy-funded
Why wouldn’t all businesses want to qualify for SBA research, Small Business GDP: Update 2002-2010, http://www.sba.
financing? The main reason would be that the business gov/advocacy/7540/42371.
has matured and reached a stage in its operations
where favorable financing is readily available due to For further details, contact Bruce Hurta, VP-Government
its long-term business track record. The track record Guaranteed Lending, at bruce.hurta@amerisbank.com.
with business bankers allows them to negotiate loan
terms from the “driver’s seat”. Many small businesses
today, however, are not in that category; they should
consider SBA financing as a tool for growing business. To
be eligible for SBA financing, the borrower must meet the
SBA definition of a “small” business.
SBA size guidelines define the maximum size that a firm
(including its affiliates) can be to qualify as a small business
for most SBA programs. Size standards are usually the mea-
sure of a business’s number of employees or its average
annual receipts. Since the enactment of the Small
Business Jobs Act of 2010, loan applicants

16 NBIZ ■ April 2022