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SBA Loan

When a small business loan is guaranteed by the SBA, it tends to have a lower interest rate than other types of small business funding.

SBA Loan

The federal government created the Small Business Administration (SBA) to help support small businesses. One way the agency supports small businesses is through SBA loans. SBA loans aren’t actually offered by the SBA. Instead, the SBA offers loan guarantees to financial institutions that issue SBA loans. There are a variety of SBA loan products, including the SBA 504, SBA 7(a), and the SBA Express.

SBA Loans at a Glance

An SBA loan is probably the best option for your business for one simple reason: they usually have the lowest interest rates. Here are the main points:

  • The loan amount range for SBA loans is $5,000 all the way up to $5 million. Remember, though, there are many different kinds of SBA loans. Each loan type has its own specific loan range. You will need to do some research to find out which SBA loan type is right for your business. We suggest consulting a financial specialist to help you make this decision.
  • The maximum loan term for SBA loans is quite a bit higher than other types of business loans. Your loan term could be up to 25 years.
  • Your SBA loan will likely be near the current prime rate, which is the rate that banks charge borrowers with the highest credit ratings. This will vary from bank to bank, but the range is usually between 6-percent and 13-percent.

If you are interested in an SBA loan, you should begin the process sooner rather than later. This is because the application process for an SBA loan can be fairly lengthy, with many potential borrowers waiting several months to see if they qualify.

Like we said earlier, there are a variety of SBA loans to choose from. Here’s a quick look at a few of the most popular types of SBA loans:

  • SBA Express – These loans usually take less time to qualify for. They can be used toward working capital or equipment.
  • SBA 7(a) – These can be used for a wide range of expenditures, including startup funds, real estate purchases, refinancing fees, and business acquisition or partner buyout.
  • SBA 504 – These loans can only be used for fixed assets or construction costs.

Main Advantages

The main advantage of an SBA loan is the low interest rate. Also, since there are a variety of SBA loan types to choose from, they can be used for many different kinds of business purposes.

Disadvantages

Like we mentioned earlier, it takes longer to get approved for an SBA loan than many other types of small business financing. If you need the money now, this likely won’t be your best funding option. These loans occasionally require collateral.

Also, if you get a years-long loan term, you might not be able to take on another loan during that period.

SBA Loans Wrap-Up

If you have the time to wait on an approval decision, an SBA loan can be a solid solution for small business funding.

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