If you are thinking of applying for a Small Business Administration (SBA) loan, you may come across a form called SBA Form 750 Deferred Participation Agreement. This form is used by SBA lenders to establish a deferred participation agreement between the SBA and the lender in the event of a default by the borrower.
What is a Deferred Participation Agreement?
A deferred participation agreement is an agreement between the SBA and a lender, which allows the SBA to defer its participation in the loan until a later date. This means that in the event of a default by the borrower, the lender will be responsible for the first loss up to a certain predetermined amount, before the SBA`s participation in the loan is triggered.
The purpose of a deferred participation agreement is to reduce the risk for the lender and to encourage them to make more loans to small businesses, which may not otherwise qualify for conventional financing. By agreeing to share the risk with the lender, the SBA makes it easier for small businesses to access capital, while also providing a layer of protection for the lender.
What is SBA Form 750?
SBA Form 750 is the document that establishes the deferred participation agreement between the SBA and the lender. It is a standard form that needs to be completed by the lender and submitted to the SBA for approval. The form includes information about the borrower, the lender, the loan amount, the terms of the loan, and the amount of the SBA`s participation in the loan.
The form also includes a provision for the lender to report any default by the borrower, as well as a provision for the SBA to review and approve any changes to the terms of the loan. Once the deferred participation agreement is in place, the SBA`s participation in the loan is triggered only in the event of a default by the borrower.
Why is SBA Form 750 Important?
SBA Form 750 is an important document in the SBA loan process because it establishes a deferred participation agreement between the SBA and the lender. Without this agreement, many small businesses would not be able to access the financing they need to start or grow their businesses.
The agreement provides a layer of protection for the lender, which makes it more likely that they will approve the loan. It also makes it easier for small businesses to qualify for financing, which can be critical for their success.
If you are considering applying for an SBA loan, it is important to understand the role of the deferred participation agreement and the importance of completing SBA Form 750. A qualified SBA lender can help you navigate the loan process and ensure that you have all the necessary documentation to apply for a loan. With the right financing in place, your small business can thrive and grow.