If you have a small business and need some extra funds, where do you turn?
You might need to purchase equipment or supplies, finance improvements or expansion for your business, or maybe refinance some existing debt you have. How can you make this happen?
Often, small business owners feel they don’t have a very good chance of getting a loan because they might have a less-than-perfect credit report, or they have a limited financial record, possibly because they are a newer small business.
They might believe that if they approached a traditional for-profit lender lending institution such as a bank, credit union, or online lender, they would be rejected for those very reasons. But if they have at least a fairly good credit report, there’s a good chance they can go through that traditional lender and get a government-backed small business loan from the Small Business Association (SBA).
Learn exactly what you need to qualify for an SBA loan here.
Your small business has a better chance of getting a loan through the SBA because you or your small business don’t have to have such a stringent credit report. The SBA will back the loan through the traditional lenders mentioned earlier, eliminating much of the risk for the bank or credit union. The goal of the SBA is to help out entrepreneurs and small businesses, and traditional lenders are much more likely to loan money if backed by the SBA. Your traditional lender is guaranteed that the government will pay off the balance of a loan in case the borrower (you) should ever default.
The SBA will dictate what the repayment period guidelines are, and they will set their own interest rates, which are usually lower than those from the private sector. Being backed by the SBA gives a small business significant credibility and is one of the best ways to secure a small business loan.
A small business loan from the SBA makes perfect sense for everyone involved. The bank has less risk than they normally would have because the loan is backed by the SBA (government), and the government has access to a lot of money! For the small business, they have easier access to capital and better terms than could be found anywhere else.
Different Types of SBA Loans
The most popular SBA loan is the 7(a) Loan Guarantee Program. It is a very versatile loan that can be used for purchasing a business, real estate, or equipment, or it can be used for refinancing debt or as working capital. The loans can be as much as $5 million, and they offer longer repayment terms and low-interest rates. They are very affordable and are a popular option for small businesses.
One of the most recent variations of the 7(a) Loan is the SBA 7(a) Paycheck Protection Program Loan, which is a modified version of the SBA 7(a) loan. It can be up to $10 million and will be forgiven if used to fund payrolls of small businesses.
Other types of SBA loans include:
- SBA CDC/504 Loans: Used to purchase commercial real estate
- SBA CAPLines: Lines of credit
- SBA Export Loans: Design for exporters
- SBA Microloans: Smaller loans up to $50,000
- SBA Disaster Loans: Businesses impacted by natural disaster
There are Small Businesses Administration offices all over the country in the US, and they are there to help small businesses thrive. If you are a small business needing some capital, contact one and find out what you need to secure your own small business loan, so you can grow or continue operations of your small business.
Do you have questions about SBA loans? Affinity Beyond Capital can help. We are an approved lender. Give us a call today!