SBA Loan: Is It the Financial Solution for Your Business?

September 27, 2019
SBA Loan: Is It the Financial Solution for Your Business?
Close up of signing a SBA loan contract in the office.

Are you looking to increase working capital for your business, purchase inventory and equipment, expand new products and services, or open a new location for your business?


Should you consider getting an SBA loan to finance your business?


What Is An SBA Loan?


Small Business Administration (SBA) loans are small business loans offered by banks and traditional lenders and guaranteed by the SBA.


They have different loan programs suited for different kinds of business, they include:


SBA 7(a) loan program

504/CDC loan program

Microloan program

CAPlines of credits


There are a few requirements to qualify for the loans. They include the following:


Strong business financial statements

You have to demonstrate excellent personal credit

You have to provide adequate collateral

Sometimes you may need to give a personal guarantee

You need to provide individual income and business tax returns


If you wish to get an SBA loan, consider these requirements and ensure you fulfill them before applying to increase the chances of getting approved.


What You Get From SBA Loans


1. Low-Interest Rates


When you’re considering taking a loan, the biggest worry is how much it would cost you in the long run. Unlike other loan programs, SBA loans have insanely low-interest rates. SBA loans are cheap, especially for those looking for long-term loans. There is also a capping on how much interest the lenders can charge you.


2. Suitable Repayment Terms


A loan is right for your business if the repayment timeline doesn’t often pop into your mind and cause you distress. SBA loans offer flexibility when it comes to payment. Some have repayment periods going as long as 25 years, allowing you to figure out a suitable plan for your business.


3. Low Down Payment


You might have tried getting a loan, and the down payment is almost equal to the amount you’re borrowing.


Downsides of Taking an SBA Loan


The following are the challenges you may encounter when taking an SBA loan:


It won’t be a walk in the park to get a loan that has a lot of benefits. For your business to qualify for SBA, they must meet the criteria and definition of a small business. These loans are highly sought after; therefore, get a lot of applicants. Only a handful of business who prove themselves get a chance.

Be ready to do the paperwork. SBA loans take a lot of factors into consideration. You will be required to submit a lot of documents.

Due to the high number of applicants, the paperwork takes longer to process, going up to a couple of months. This might not be suitable for your business. If you’re looking for a quick loan, SBA loans might not be your solution.

If you default and things go for the worse, it will be a bumpy ride. The process is not for the faint-hearted.


Learn More About an SBA Loan


An SBA loan makes sense for your business if you meet the requirements. We can help discuss whether you need this type of loan for your business.  While undeniably fantastic, SBA loans should not be your only option. Consider other factors like time and business needs. Every loan product has its pros and cons.


Contact us today for assistance in making sound financial decisions!