Has business been booming?
Are you looking to expand but don't quite have the funds to do so?
An SBA loan may be your ticket to the big-time.
What is an SBA Loan?
There are many types of SBA Loans, to include 7(a), Community Advantage, Disaster, and Microloans
SBA loans range from $50,000 to $5.5M; the approval process takes 30 days to a few months. The Express loan aims to respond within 36 hours.
SBA loans are issued by private lenders (banks or credit unions) but backed by the federal government. i.e. If you default on the loan, the federal government will repay the lender.
All major owners of the company are responsible for loan repayment. If the loan goes unpaid, the government will come after owners' personal assets.
What are the benefits of an SBA loan:
Competitive Rates: In short, the government works to keep interest rates low for SBA loans.
Low Fees: Fees for SBA loans usually consist of an upfront guarantee fee, based on the loan amount and the maturity of the loan, and a yearly service fee - based on the guaranteed portion of the outstanding balance. The SBA reassesses its fee structure each year.
Longer Terms: More time is allowed to repay, which means you'll have more money available for other business needs. The loan terms will depend on how you plan to use the money. Terms are set between 10 and 25 years currently.
Who is Eligible & How to Apply:
Unfortunately, if your business is struggling or if it falls into any of the ineligible categories, such as charitable and religious institutions, you should not apply.
To qualify for an SBA loan, you typically need at least two years in business, strong annual revenue and a good credit score, which starts around 690.
The SBA offers a convenient Lender Match tool to match potential borrowers with lenders within two days.
If you're applying through a traditional bank work with one that has a track record of processing SBA loans as they'll be better able to guide you.
Summarized by Helena Benoit
Credit: For more details, visit NerdWallet - https://bit.ly/3jxqsRp