The Small Business Administration (SBA) offers loans to small business entrepreneurs through different financial institutions for a variety of reasons including, but not limited to, real estate purchases, business acquisitions, working capital and equipment. As a federal agency, the SBA does not directly loan the money, but small business owners can gain access to these loans through a bank or other financing company. The SBA guarantees a portion of the loan, therefore making this type of loan more attractive to lenders, in particular for those with a lesser credit rating who may not qualify for a traditional loan. With multiple programs available and low payment rates, these are an attractive option for many small business owners, but be prepared for a longer process and much more paperwork.
Features
Maximum Loan Amount
$5,000 – $ 5 Million
Loan Term
5 – 25 years
Interest Rates
6 – 13%
Speed
As little as 2 weeks with preferred SBA lenders
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How it works
Once you find a band that participates in the SBA financing program, you will start a lengthy paperwork process of applications and verifications.
You will need financial statements including proof of your credit and collateral as well as your business plan and ability to make payments. This process can take anywhere from thirty days to several months, so be patient when going this route.
Once you have decided to go with an SBA loan, you will need to choose which type of loan best meets your needs. The 7(a) loan is the most widely selected because of its flexibility in use. This type of loan can be used for the majority of your business needs and doesn’t require a fixed or specified purpose.
If you are looking to make larger equipment purchases or to buy real estate, then the CDC/504 loan may be a better option for you.
Whichever option you choose, be sure to have all of your documentation ready when contacting a lender.
Modest interest rates and low down payments
Longer terms and monthly payments
Few restrictions on use of funds
Helps build or improve credit score
Longer, stricter approval process
Prepayment penalties for longer terms
Collateral may be required
Longer applications and paperwork
What it costs
With reasonable interest rates ranging from 6-13%, SBA loans are an attractive option to many small business owners. Depending on the type of SBA loan you choose, you could have fixed or variable interest rate. Keep in mind that individual lenders have the option of adding an additional spread to the base rate of the loan when figuring your final rate with a maximum increase of 2.75%.Both the 7(a) and 504 loans have fees that can be included in the total cost of the loan.
A loan through the Microloan Program does not have fees but has a much lower cap on the total loan amount. Repayment on SBA loans ranges from 5-25 years depending on the amount and purpose of the loan.
Quick and simple process, from Quote to Funding.
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Apply
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