Currently, the most popular form of financial assistance from the SBA is through the agency's Low Documentation ("LowDoc") Program, a derivative of SBA's long-established guaranteed loan program. Initiated in 1993, LowDoc expedites the procedures for obtaining SBA guarantees on commercial loans under $150,000 (the total outstanding balance of all SBA loans to one customer is limited to $150,000). The program has been very successful, permitting nearly 90 percent of applicants to obtain financing. Moreover, the previous SBA problems regarding bureaucratic delay and protracted loan approval procedures have been reduced so that processing time for a LowDoc application is usually less than one week and they're aiming for a 36 hour maximum in the near future.
In addition to meeting the general eligibility criteria for a SBA loan guarantee, qualification for the LowDoc program requires that both of the following be true:
The terms of an SBA guaranteed loan are generally set by the private lender according to its own loan criteria. The SBA does, however, forbid borrower charges in addition to the SBA guarantee fee (maximum 2 percent) and caps are set on maximum interest rates.
The interest rate on LowDoc loans is capped at a set amount above a New York prime rate (Wall Street Journal prime). The caps vary according to the amount of the loan. For loans of less than $25,000, the maximum loan rate is 4.75 percent above the prime. For loans between $25,000 and $50,000, the cap is 3.75 percent above prime. If the loan is at least $50,000, then the cap is determined by the loan maturity period. For loans less than seven years, the maximum interest rate is 2.25 percent above the Wall Street prime; for loans of seven years or more, the maximum is 2.75 percent over prime.
The SBA also allows lenders making loans of $50,000 or less with maturities greater than 12 months to retain half of the guarantee fee that is normally paid to the SBA. (Loans under $50,000 can carry higher interest rates so that private lenders have an incentive to make such small loans. The SBA previously sponsored a Small Loan Program for these small loans, but that program has been incorporated into LowDoc.)
LowDoc still isn't NoDoc. Although the LowDoc program requires less documentation than the SBA previously required, you must still submit certain paperwork and comply with the private lender's ordinary loan application procedures. An application for an SBA loan guarantee is submitted through a participating lender and the lender typically uses its regular processing procedures. For a guarantee on a loan of $50,000 or less, the SBA requires:
Some samples of forms for loan programs can be found on the SBA
Forms Library page. Many of these documents can be filled in and printed by
the use of the Adobe software offered at no charge on the SBA site.