The U.S. Small Business Administration (SBA) offers a variety of products and services to small businesses spanning every imaginable industry.
SBA loans have long been popular, thanks to a variety of benefits and very few drawbacks.
Of course, before you apply for an SBA loan, there are a few things you need to know.
To start, an SBA loan doesn’t mean you’re borrowing money from the U.S. Small Business Administration. Instead, you work directly with a partner lender. The SBA’s role is to guarantee the loan, which takes the risk off the lender’s plate.
With that out of the way, let’s turn to the many benefits associated with an SBA loan:
- Many lenders to choose from: As noted above, the SBA isn’t the lender. For this reason, you’re likely to find several lenders in your local area who can help you with this type of loan.
- Longer term lengths: For example, with a non-real estate loan, you can often secure a term of up to 10 years. This is advantageous in the event that you want the lowest possible monthly payment.
- Low interest rates: This is one of the top benefits of an SBA loan. For example, some types of loans have an interest rate cap, which makes it clear to see just how much you’re saving when compared to more traditional loans.
- Lower down payment requirements: Some SBA loans require no down payment. And even when one is required, it’s not as large as a traditional loan.
What Type of SBA Loan is Right for You?
It’s important that you have a clear understanding of each type of SBA loan, as that allows you to choose the one that best suits your financial circumstances and goals. The three most common types of SBA loans are:
- SBA 7(a) loans
- SBA CDC/504 loans
- SBA microloans
If you have questions about these SBA loan programs – such as those associated with the type that’s best for your business – reach out to a partner lending institution for more information.
The loan officer should be able to answer your questions, provide more details on moving forward, and help you decide which type of loan to apply for.
It’s important that you know the finer details of each type, as that’s the only way to make a confident decision.
At this point, you understand the benefits of an SBA loan as well as the many types that are available to you.
If the time has come to apply for an SBA loan, do your homework and don’t make a final decision until you’re 100 percent sure of what’s best for your company.
Do you have any experience applying for an SBA loan? What led you down this path? Were you happy with your decision?
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