What You Should Know About SBA Loans
As a small business owner, you may need funds to help you achieve specific goals. Whether it’s to purchase new equipment, pay your bills, renovate your current location, or expand to a new location, a loan is a highly beneficial tool that can help you meet your needs. Getting a traditional business loan from a bank can be difficult for small businesses though. Instead, sba loans may be able to help you get the funding you need for your business.
What Is an SBA Loan?
Traditional bank loans can be difficult for small business owners to obtain. The Small Business Administration, however, has made getting financing easier. While the SBA doesn’t provide the loans, they do set the guidelines for lenders (traditional and online) to provide financing. The SBA then partially backs the loan, making it less risky for the lender.
What Types of Loans Are There?
There are several types of sba loans available. These include:
- 7(a) loans.
- 504 loans.
- Microloans.
- Disaster loans.
What Sort of Rates and Terms Can I Expect?
Rates and terms vary based on the lender. The SBA sets a cap on what lenders can charge in interest though. Both rates and terms vary based on the type of SBA loan you apply for. Maximum terms are as follows:
- Seven years for working capital.
- 10 years for equipment purchases.
- 25 years for real estate.
The amount you can borrow also varies based on the loan type. You can borrow up to $5 million for 7(a) and 504 loans. For a microloan, you can borrow up to $50,000. Disaster loans are available up to $2 million.
How Do I Apply?
Getting an SBA loan will take some time. It can take weeks, or even months, for the approval process and disbursement of funds. Being prepared with the necessary documents can help to make the process easier. You’ll need:
- Personal information.
- Business information.
- Financial statements.
- Business and personal tax returns.
- Business lease.
- Borrowing history.
The SBA has specific requirements that need to be met, and the lender may also have their own requirements. Be sure that whatever lender you choose, you work with someone who has experience with SBA loans and who can meet the needs of your business.
If your small business needs money, an SBA loan may be just the thing to help you achieve your goals. Take a look at different lenders offering these types of loans so that you can get the best rates and terms for you.
