Address: Ballysheedy, Gort, Galway                  Email: finance@smefinance.ie                          Phone: 085 197 5326

Small businesses benefit significantly from business loans. A lot of small business owners do not have enough financial resources to run their ventures without any interruptions.

Business loans come into the picture to help them finance their business operations. One such type of business loan is the SBA loan. In this article, we will tackle what SBAL loans are, and how small business owners can take advantage of these loans, as compared to other loan types. If you are a small business owner and you are looking for funding, read on and learn how you can find financial help for your enterprise.

What are SBA loans?

SBA loans stand for Small Business Administration loans. These loans are drafted between lenders and different SBA companies. Lenders prefer to enter into an agreement with SBA agencies because they guarantee a portion of the loan amount to the lenders, meaning even if the borrower fails to pay the loan, the SBA agency will shoulder a considerable amount of the loan and pay it to the lender. With this, lenders are able to offer payment terms advantageous to borrowers. This Fundbox SBA loans simplified way, you will learn how small businesses can get ahold of them for the benefit of their companies.

SBA loans versus bank loans

Bank loans are the most common loan types that businesses go to for funding. Although there are plenty of banks that offer business owners various loans, applying for one can get cumbersome. Let us compare these two loan types to give you a glimpse of what is better and more convenient for a small business owner like you.

  1. Loan requirements and qualifications. Banks usually require potential borrowers a lot of requirements, and they must qualify to their criteria before a loan is granted. A small business owner that is just starting may not have all these requirements and qualifications, thereby ending up being disapproved of the loan. SBA loans, however, have lower qualifications from lenders, thanks to the guarantee that SBA agencies provide lenders.
  2. Application process. Banks take a long time to process loan applications, and most small businesses do not have that time. SBA loans take a shorter time to get processed, so small business owners can use the funds where they intend them to be.
  3. Specific clientele. Bank loans can be for small and big business owners alike. But SBA loans are targeted to small business owners, and SBA agencies tailor their loan offers to their market. It can be easier to apply for a startup loan from an SBA company than a bank.

How to determine if an SBA loan is the right one for you

Evaluate your qualifications and see if you can secure all the requirements for an SBA loan. There are many success stories with SBA loans, and your business might be one of them. If your small business is struggling to keep afloat of the competition, contacting an SBA agency for help may be the best move for you. You will be asked of your qualifications, and if you fit into their criteria, you can start securing your requirements so you can soon be approved of an SBA loan.

Various SBA loan types

There are multiple types of SBA loans, and choosing the right one for your business needs may be a bit difficult. Knowing the types and what each of them is will help you narrow down your options.

  1. 504 loans. These are loans for businesses that are looking for long-term loans to buy properties, machinery, refinancing loans, and such. As much as $5 million can be granted to a borrower whose business is not worth more than $15 million and must be averaging at least $5 million in income for the past couple of years.
  2. 7(a) loans. These are the most common SBA loan types. SBA agencies can grant anywhere from $30,000 to $5 million to borrowers. These loans can be used for different purposes, such as to fix existing equipment and assets, procure new equipment, and to finance startup expenses, among others. Good credit and positive business history are required of borrowers. They will have to put up collateral for a 7(a) loan.
  3. Micro loans. These loans were designed to aid small sectors such as veterans, women minority and low-income business owners. The loans can be anywhere from $500 to $50,000. Borrowers need to secure collateral to qualify for a micro loan.
  4. 8(a) business development loans. The government grants these loans to economically or socially disadvantaged American businessman. Up to $4 million for goods and services can be given to borrowers and up to $6.5 million for manufacturing businesses.
  5. Community advantage loans. Business ventures that operate in underprivileged communities. Business owners can borrow up to $250,000 that they can use for various purposes. Business owners can repay the loan for 7 to 10 years with 7 to 9 percent interest.
  6. CAPLines. These are working capital loans that can be as much as $5 million that can be payable up to 10 years. These loans are most suitable for businesses that need to finance their operating costs.
  7. Export loans. For small businesses that need funds to export their products, export loans are best for them. They can be granted up to $5 million.
  8. Disaster loans. These are loans offered to small businesses that have been destroyed by natural disasters. They can be given up to $2 million for disaster relief.

Being a small business owner presents its difficulties. You need all the help you can get to get your venture off the ground, especially financially. SBA loans are here to provide assistance to small business owners with different financial needs but do not have any other means to fund their inventory, machinery, property, cash flow, etc. Establishing a good credit score and a good business reputation is the first step towards securing an SBA loan from a reputable SBA agency.

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