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SBA loans seem to be the answer to an entrepreneur's monetary needs, but there are some major circumstances to consider when applying for an SBA loan. For instance, by SBA requirement most business purchases need to have an appraisal. Often times, an appraisal is based on square footage and usually starts in the thousands. Furthermore, the appraisal itself can take several weeks to complete and the general public is unaware of the timeliness to put the appraisal together.

The collateral required to secure an SBA loan is absurd. Often times, owners are required to have life insurance equal to the amount of the loan. This is very difficult to obtain and sometimes requires multiple life insurance policies that could be liquidated in the event of a death. Again, the process to obtain this multitude of insurance takes a great deal of time.

There is a large preparation fee for the SBA loan. The prep is commonly done by an accountant at a larger than life rate. The documentation required by the accountant to put the loan together will make the average business owner swear that they are doing most of the work. Documents include three years worth of personal and business tax returns, loan documents, bank statements, mortgage documents, and proof of insurance. If you are buying an existing business, have fun tracking down the previous owner's tax statements, years worth of profit and loss statements, their business insurance documents, and a plethora of financial statements that most owner's do not want to reveal.

Get ready to sign over your house and give up any type of refinancing on your house until the loan is paid. Be prepared to be tied up with ten years worth of payments. Any type of other collateral that you did have in your name will now be owned by the SBA. Once the appraisal fee, set up fee, and closing fees are added to your loan, you can expect at least an additional $15 grand on your total loan.

Finally, like everything else associated with the SBA loan, time is probably the biggest factor. Every time you turn around, you need to find an additional document. The attorney's office postpones the closing every other week because of missing documents from an owner or the bank. During your closing be prepared to sign, sign, and sign your life away.

Obviously I am not a big proponent of an SBA loan. If a business owner can aquire monies by any other means, I would suggest exploring alternate routes.

Learn more about this author, Jamie Bessett.
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