SBA loans are one of the most common financing options for small businesses. Most businesses have to consider finance options. Here are five facts to consider.
Commercial Lenders Make the Loans
The SBA does not make the loans themselves. The banks are the lenders. What happens is that the SBA makes the rules and the banks provide the funds. Then, the SBA backs a portion of the loan. This way if a business owner defaults, the bank is not out money.
Expected SBA Loan Features
The 7(a) loans are the most popular of the SBA loan. The SBA makes an effort to add flexibility to programs and products so that lenders and borrowers have options. Here are some of the most common SBA loan terms:
- Seven years for working capital
- Seven years for inventory
- Seven to 10 years for business acquisition
- Seven to 25 years for debt refinance
- 25 years for owner-occupied commercial real estate
Interest rates are variable and fees will depend on the size of the loans. Many of your loan features are discussed with the lender ahead of time.
SBA Loan Benefits
An SBA tends to have longer payback periods. The down payments are lower than traditional loans. Collateral requirements are also less stringent. For the lender, the SBA gives them a reason to be comfortable financing small businesses. After all, many banks are wary of smaller businesses due to risk. The SBA backs the loan so that it’s less of a risk.
SBA Loan Application Process
To apply for an SBA loan, you can contact your bank. Many banks work with the SBA and your bank may be able to provide you with financing options. If this route doesn’t work for you, then you can try to contact the SBA office. They will give you a preferred lender.
If you have a new business, then you should bring your business plan along. The lender will want to discuss the plan in detail. If you have an existing business, then bring along your financial statements. If your business is new, the lender will ask for tax returns or personal financial statements.
SBA Loan as an Invaluable Resource
When money is tight or when a company seeks growth, an SBA loan is an alternative that many business owners seek. If you need lower payments or if you don’t think that you will qualify for a standard loan, then this is what you want to consider. When it comes to resources for small business owners, an SBA loan is crucial.
When you’re considering a loan, you never want to forget about SBA loans. The SBA recognizes that small businesses often need the extra help and offer ways for small businesses to stay afloat, despite the economy.