Is an SBA Loan Right for My Business?

The federal Small Business Administration (SBA) program is one of the best ways to finance a small business.

Whether you’re just starting out or contemplating expansion, the SBA offers a series of loan products that can help your business. Small business growth produces jobs that help power the economy. The SBA is devoted to supporting this growth. With its banking partners the SBA, which does not make loans itself, shares the risk that comes with making loans to a new or developing business.

SBA loans come with low rates and flexible terms. On the downside, getting an SBA loan can be an exercise in frustration. The low APRs, on the other hand, make the SBA loan guarantee program one of the least expensive methods to fund your business.

So, are SBA loans worth the investment in time and energy? Ask these questions to find out …

What are the Advantages of an SBA Loan?

The SBA agreement gives banks some assurance, enabling them to approve financing or to allow borrowers to repay their advances over a longer period of time. If you have application obstacles connected to a limited operating history or insufficient collateral, or if you’re looking for financing with lower payments and a longer term, you might want to consider an SBA loan.

The SBA loan program is one of the most accessible methods of obtaining required capital for new entrepreneurs with little business experience or credit. Many financiers would not consider working with these startups without the SBA’s guarantee. SBA loans also help companies without adequate collateral to get a conventional business loan.

SBA loans also have very low-interest rates and fees. Unfortunately, they’re document-intensive, and the wait could prove to be a challenge if a deal is time-sensitive. That’s where Lendio comes in. Lendio has reengineered the process, automating so that it is less time consuming and easier for business owners to apply. The average SBA loan can take as much as 90 days to process. With Lendio, you can get SBA funding in as little as 30 days.

What Type of SBA Loan Would I Qualify For?

The SBA has four main types of loan program:

1. 7(a) Loan Program – This is the SBA’s main platform to assist startups and existing small businesses with obtaining financing. This sector represents 80 percent of the SBA loan market.
2. SBA 504 Loan Program – Mainly used for land, buildings, and other major assets, this program offers businesses long-term fixed-rate funding.
3. Microloan Program – For startups and growing small businesses, this program offers very small loans of up to $50,000, with the average being around $13,000.
4. Disaster Loans – The SBA offers this alternative to companies that have been affected by a declared disaster.

Does My Business Meet the Requirements for an SBA Loan?

SBA loans are for small business owners who do not qualify for a conventional commercial bank loan and they have a specific use for the monies that will help the company grow. For example, if orders are outpacing supply and an extra worker, some new equipment, another van, or another location would help meet that demand profitably after covering the new loan payment, this would be considered specific use.

That said, it’s important to ensure that your investment outlasts your loan since SBA loans are often long-term. You shouldn’t have to make payments for ten years on a piece of equipment that only lasts five.

The four typical business requirements for receiving an SBA loan of any type are:

• Personal credit score of 660+
• Run by a principal who has been in business at least two years
• Achieved revenue of at least $100,000 over the past 12 months
• Seeking at least $30,000 (this does not include applicants to the microloan program)

Talk to your bank or lender about your business profile and requirements, since each loan type has its own specific conditions for qualifying. In addition to meeting SBA requirements, take note that financiers will also take into consideration credit issues such as your equity investment, business cash flow, collateral, etc. At present, the SBA is very active in franchise financing. It also provides funding for startups.

If you’re ready to explore the possibility of an SBA loan, Lendio will instantly match you with the best small business loan program to fit your business needs by leveraging our network of over 70 lenders including those who work with the SBA. Visit www.lendio.com/business-loans today, to learn more about small business loans including SBA loans and how they can work for your business.