Why You Need an SBA Loan
An SBA loan, which is a government-backed small business loan, provides small businesses with a much needed financial boost. Like other small business loans, it requires a substantial amount of documentation and can take several weeks to fund. You also need to meet strict requirements to qualify. So, what’s the point? If you need financing for your business, here are a few reasons to consider a Small Business Administration-backed loan.
Greater Borrowing Limits
While alternative lenders are becoming more popular for small business owners to access working capital, these sources can’t always lend what you need. Since the SBA backs SBA loans, there’s less risk for lenders. As such, you can borrow more, up to $5.5 million, to be exact.
Some business loans dictate how you can use the funds you receive. SBA loans, the 7(a) loans, in particular, provide much greater flexibility. You can use the money for just about anything your business needs, whether that’s expanding to a new location, increasing your inventory, or hiring (and training) new staff. The 504 loans are a bit more restrictive. You can only use the funds for fixed assets.
Lower Down Payment Requirements
Depending upon the type of loan you want, you may need to provide a down payment. SBA loans are one of those loans that require money down, but the requirements are much lower than those of traditional business loans. You typically only need to provide 10% to 20%, while microloans don’t require any down payment at all.
Favorable Interest Rates
While lenders charge different interest rates, the SBA dictates how high those rates can go. Being backed by the government also helps reduce the risk to a lender. As such, SBA loans have some of the lowest rates around. Your exact rate varies based on numerous factors, but it’ll likely be lower than other options.
Longer Repayment Terms
SBA loans have some of the longest repayment terms available. Depending upon how you’re using the funds (and the type of loan you choose), you may have anywhere from 7 to 25 years to repay what you borrow.
Access to Resources
The SBA might not provide you with the funds directly, but it does offer many valuable resources to business owners, such as mentorship and training opportunities. Even if you don’t qualify for a loan, you can still take advantage of these resources.
The SBA may have strict requirements and request a lot of information from you, but an SBA loan is an invaluable source of funds that can help you grow your small business. If you think it’s the right solution for you, begin the process by looking for SBA-approved lenders and start comparison shopping.