Is an SBA Loan Right for Your Business?

Whether you are considering expanding your small business, or need financing on starting a new business, the federal Small Business Administration, or SBA, offers a series of loans designed to benefit your business. Small businesses are the backbone of the economy, and provide more jobs than any other area. The SBA is committed to providing small businesses with the financing they need, and with the help of it’s banking partners, offers services that help boost the success of small businesses every day. SBA loans, however, are also subject to man of the same terms and conditions other lenders demand.

Advantages and Disadvantages

The advantages of an SBA loan include low APRs, flexible terms and minimal demands when it comes to collateral, among several others. SBA loans offer financing to small businesses at lower rates, and provide longer payment plans for those that need it. Among the disadvantages, the fact that SBA loans can take a long period of time to be approved and is very document-intensive stands as the most glaring.

Types You May Qualify For

SBA loans are compiled of 4 main programs:

#1: 7(a) Loan Program – The main platform for SBA loans, it represents 80 percent of the SBA loan market. This program helps small businesses obtain financing for starting and expanding.

#2: SBA 504 Loan Program – Primarily utilized for land, buildings and other assets, this program provides long-term, fixed-rate financing.

#3: Microloan Program – Ideal for small businesses looking to grow their businesses, or entrepreneurs just starting out, this platform offers small loans averaging about $13,000, with its maximum funding at $50,000.

#4: Disaster Loans – For companies that have been affected by a declared disaster, the SBA offers financing through this program.

Business Requirements

SBA loans are for businesses that do not qualify for commercial bank loans, and have specific needs to be filled though the funding. There are 4 general requirements a business must meet in order to receive an SBA loan, which include:

  • Seeking a minimum of $30,000 (excluding microloan applicants)
  • Maintain a personal credit score of at least 600
  • Achieved revenue of at least $100,000 over the last 12 months
  • Run by a principal that has been in business for at least 2 years

If you are interested in an SBA loan for your small business, speak to your bank or lender about your business profile and requirements, and if you qualify. In addition to your business requirements, consider that all financing companies will observe your credit history and equity investments, current cash flow and collateral. If you and a professional in the field believe and SBA loan is right for your business, contact a lender today to discuss your options.