Many people think that the Small Business Administration (SBA) lends money. In fact, the SBA is not a direct lender to businesses. Banks loan money to businesses, while the SBA helps banks feel more comfortable loaning money to Small Businesses by offering the bank a loan guarantee.
Since banks are the direct lenders to Small Business, the bank is the one that has to feel comfortable with the business’s ability to repay the loan. With all its influence, the government is not in a place to force banks to make loans they do not feel are prudent.
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