Tips When Considering an SBA Loan

Tips When Considering an SBA Loan

Small Business Administration (SBA) has been helping businesses obtain financing at reasonable rates and fees when traditional financing hasn’t been a fit. If your business needs cash to start or grow, here are a few tips when considering an SBA loan.

1. The SBA Doesn’t Make the Loans — Commercial Lenders Do

Ironically, one of the keys to the success of the SBA’s business model is that the SBA does not make the loans themselves. Instead, they make the rules, and commercial lenders provide the funds to the small business borrowers. If you’re looking for more information about SBA loans check this out

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2. Features of an SBA Loan

The most popular types of SBA loans, including a multitude of term loans and lines of credit. Over the years, the SBA has made a concerted effort to add flexibility to its programs and products so that lenders and borrowers not only have more choices but also simpler delivery mechanisms. Standard SBA loan terms are as follows:

1.Working capital: 7 years

2.Inventory: 7 years

3.Equipment: 7-10 years

4.Business acquisition: up to 10 years

3. Benefits of an SBA Loan

For the borrower, SBA loans typically have longer amortizations. Down payments are often lower than what a bank would require for a standard commercial loan. 

On the lender’s side, the SBA guarantee can help the bank get comfortable with things they might otherwise not be willing to do, such as financing a newer business, overcoming one or two credit factors, or financing a type of business they might not normally consider.