If you have faced challenges accessing business funds in the past, you may want to know what SBA loan programs are and if they are a good option for your business. Without a doubt, SBA loans are among the best options when it comes to funding a business. The loans are guaranteed by the government and are normally characterized by low-interest rates and flexible repayment terms. Getting a small business administration loan is the best way to finance your business without getting into a debt cycle. But as much as these loans are popular for business financing, there is one shortcoming that comes with it-getting an SBA loan is tough. But still, the low interest rates incurred by the loans makes them the best option to access business funds. With background research and prior preparation, you may be lucky enough to qualify for one of the cheapest methods of business financing. So what exactly are small business administration loans, and who is eligible to apply?
Even before starting out with the SBA loans guide, it is important to note that SBA does not directly offer the loans to entrepreneurs. Rather, it provides a guarantee to direct lenders and bank loans when providing the loans to business owners. With this guarantee, SBA promises to pay a percentage of the loan in case the borrower defaults. So if you decide to request for an SBA loan, you are basically requesting for a commercial loan through an authorized lender or banking institutions with an SBA guarantee. Small business administration loans can be a great relief for business owners who may otherwise not qualify for traditional loans due to one reason or another. It therefore opens an opportunity for thousands of entrepreneurs to start and grow their businesses.
There are quite a number of SBA loans that entrepreneurs can request for depending on their business needs. The loans can also be used for different purposes including equipment purchases, revolving capital, refinancing an existing debt among other reasons. Each loan program requires individual application and comes with its own terms. Before requesting for an SBA loan, it is important that you get more information on the different loan options available and choose one that most suits your business. You can then approach an advisor or directly speak to the lender and discuss the loan options. Here are the main types of SBA loans you can apply for;
General business loans have different terms of repayment which can be amortization, collateral or maturity terms. Business owners can borrow up to $5 million. The interest rates vary from one lender to another, but they mostly fall between 2% and 3% depending on the loan term.
The loan term and eligibility depends on the circumstance and the type of disaster loan you request for. If your business is insured, it is important to include this in the loan to know the total amount that the insurance company will pay before coming up with a relevant loan amount.
Different SBA loans have their own small business loan requirements, which is important that you first talk to your SBA lender about your needs before applying for the loan. Most lenders will also consider credit factors like equity investment, business cash flow and collateral when approving the loan.
You can start by checking the loan application checklist on the SBA website. Some of the required documents include your business records and tax returns. Other information and documents that the lender will need include;
You can then find names of approved lenders from your SBA district office. SBA express is a financing program available that can have your loan approved in as soon as 36 hours. If you have a good credit score and your business is in shape, the approval process will be shorter.
The benefits of SBA loans manifests in different ways;
All these will entirely depend on your business growth. It is, however, important to note that not every small business loan is a perfect match for your business, and this also includes SBA loans. There are business needs that will require you to get a loan faster than SBA loans can allow, and other loans do not have long paperwork processes involved in SBA loans. In this case, alternative loan options can be best for you. However, there are quite a number of benefits that come with SBA loans. The low-interest rates incurred is what makes the loan popular among many business owners. Compared to other loan types, SBA loans attract a relatively lower rate. The rates are also fixed, which comes as a relief for business owners. Having your loan approved in a financial institution for borrowers with poor credit history can be a nightmare, which puts such borrowers in a tough place. But since the government guarantees 80% of the total amount borrowed in SBA loans, it is also a reliable source of accessing business funds. Another benefit of SBA loans is that they have flexible repayment terms which allow you to cater for business expenses while repaying the loan.
Whether you need money to start a business, purchase business equipment or for working capital, there are plenty of loan options available. Getting a business loan from SBA is among the most convenient ways to finance a business. The loans do not only attract a low-interest rate but also comes with convenient terms and conditions. There are several approved lenders who provide different types of business loans. For the loan to be productive, it is important that you first analyze your business before determining which loan option best suits your business needs.