If you are considering getting a small business loan through the Small Business Administration, you first need to know if your business qualifies as a small business at all. When the Administration was set up, the Congress had to put in place what type of small businesses, including what a small business was classified as, could apply for and obtain this type of loan. To do this, they went industry to industry and defined what qualified as a small business. Actually numbers were placed on the values of what could be considered a small business and these numbers have changed somewhat over time.
Is It A Small Business?
Under the Small Business Act, a small business is one that is independently owned and operated. In addition to this, the business shouldn’t be dominant in its field. From here, the business must qualify based on the size limitations that are in place for that business depending on what the business size is in comparison to others in the field. To find out if your business qualifies as a small business in applying for a small business loan through the SBA, you’ll have to visit their website and access the Small Business Size Regulations table that is in place.
There are two ways in which the SBA determines if your small business is actually that. To do this, they reference the “size standard” which is what defines the individual businesses as they compare to others in the industry. This standard is set and modified over time as necessary. The two ways in which they determine if a business is a small business then, is to consider one or both of these two methods.
• The number of employees that you have working for you is one factor.
• The amount, on average, of receipts that you take in per year is another factor.
When considering these two criteria, the SBA determines if a small business will qualify for small business loan under their guidelines. You may think that your business is the right type, but it may not be. When considering this type of loan; first determine if your business is eligible based on your industries standard size. This will play a significant role in your ability to obtain the best business loans for bad credit through the Small Business Administration, but these rules are not necessarily exactly the same for other lenders out there either.