Small businesses need capital to grow and expand. That’s why the Small Business Administration (SBA) offers a wide array of financing options for small business owners. This article explains the key things you need to know about getting an SBA loan.
What is an SBA loan?
The Small Business Association was established by Congress in 1954 to serve as the nation’s premier resource for entrepreneurs. The SBA offers a variety of financing options designed to assist eligible small businesses in obtaining the capital they need to expand and grow. You can ask the help from an SBA expert like a funding circle review. The SBA also has special loan programs designed to help minorities, women, veterans, and others. The SBA may approve loans to individuals who own a small unincorporated business (SMB), a small incorporated business (SMB or micro), or to a limited liability company that owns an SMB. The type of business can have a significant impact on the amount of financial assistance a business may receive. For instance, an owner of a professional service business may receive more assistance than a small retailer or wholesaler.
Types of SBA Loans
There are five core types of SBA loans. The types of loans include: – 504 Loan- This type of loan is designed for small businesses that need to temporarily stop business operations. For example, a small business owner may need to take a leave of absence, go on a sabbatical, or focus on a different part of the business.
- 7(a) Loan- This is the largest type of loan offered by the SBA. It is an equity investment and gives you the opportunity to participate in the ownership of the company.
- 7(b) Loan- This type of loan is designed to assist in financing a product development project.
- 8(a) Loan- This is a short-term bridge loan to cover operational shortfalls.
- 9(a) Loan- This is a small business investment loan that gives you the opportunity to share in the profits of the business.
Read the fine print before you apply The SBA has a number of programs designed to help qualified applicants get loans. However, the government does have to be careful with how much money it lends out. As a result, some of the SBA loan programs have requirements and restrictions that can be confusing and intimidating to new business owners. Just as you should look at a bank loan application with a microscope and compare it to other loan applications in detail, you should do the same for the SBA loan application process. The more effort you put into the process, the better your chances of successfully obtaining an SBA loan.
Which SBA Loan is Right for You?
Before you apply for an SBA loan, you need to decide which type of loan is right for your business needs. Here are a few things to consider when deciding which type of loan to pursue:
- How much money do you need?
- What is your business’s collateral?
- How much time do you need to repay?
- What are your repayment options?
- What are the debt repayment penalties?
- What are the interest rates on the different types of SBA loans?
- What are your tax benefits for taking a loan?
- Are there any other benefits of taking an SBA loan?