What Is an Sba Standby Agreement

If you`re a business owner looking to secure financing, you`ve probably heard the term “SBA standby agreement” being thrown around. But what exactly is an SBA standby agreement, and how can it benefit your business?

To put it simply, an SBA standby agreement is a legal document that allows a lender to provide a loan to a borrower with the backing of the Small Business Administration (SBA). This means that if the borrower is unable to repay the loan, the SBA will step in and cover a portion of the loan amount.

So why would a lender want to use an SBA standby agreement? For one, it provides them with added security in case the borrower defaults. This can make them more willing to provide the loan in the first place, as the SBA`s backing reduces their risk.

For borrowers, an SBA standby agreement can be a useful tool for obtaining financing. It can make it easier for them to qualify for a loan, especially if they have a less-than-perfect credit history or are lacking in collateral. Additionally, since the SBA`s backing reduces the lender`s risk, it can mean that borrowers are able to obtain more favorable loan terms than they might otherwise be able to.

It`s worth noting that an SBA standby agreement is not the same as an SBA-guaranteed loan. With an SBA-guaranteed loan, the SBA provides a guarantee to the lender that they will cover a portion of the loan if the borrower defaults. With an SBA standby agreement, on the other hand, the SBA only steps in if the lender is unable to recover the full loan amount.

So if you`re a business owner looking to obtain financing, it`s worth considering whether an SBA standby agreement could be a useful tool for you. It can provide added security for lenders and make it easier for you to qualify for a loan, potentially on more favorable terms. Just be sure to work with a reputable lender and carefully review the terms of any agreement before signing on the dotted line.