Question

• Describe in detail what the SBA role is in the loan process. What do they do to help people get loans? What do they do for the lenders to reduce their risk?

Answer 1

Small Business Administration (SBA), helps small businesses to get easy loan for business activities. It provides guarantees and counseling to small businesses which proves beneficial in getting loan.

SBA provides loan guarantees to commercial banks and other financial institutions. Further, SBA provides the list of essential documents required to processing loans thereby make it easy for small businesses to get easy loans.

First, SBA goes through credit history of borrowers and further takes guarantees of loans which are sanctioned to small businesses. SBA provides guarantees that it would pay back part of loan in case of default on the part of borrowers. Hence, it reduces risk factor in lending process.