About SBA loans. Is it worth looking into? - Rapid Read

Updated: Sep 1, 2020

How it works

The Small Business Administration (SBA) works with partnered lenders to make funding available to small business's who are having trouble receiving financing from typical banks or lenders. The SBA is not lending directly, but is in a sense "co-signing" on the loan from a funding partner, by doing this, they increase your chances of getting funding because they are now partially responsible for debt should the borrower default.


What's it for

The funding is provided for almost any expense pertaining to the business including real estate, general capital, office equipment, inventory, consolidating debts etc.



Requirements and eligibility

Note that receiving an SBA loan is not quick and easy, there is a lengthy application and waiting period and no guarantee of approval.

In order to be eligible, you must meet the following requirements.

- Be a for-profit business

- Do business in the U.S

- As an owner, have invested your own time and money into the business

- Have been unable to receive funds from any other financial lender

Typical requirements to qualify

- 4+ years in business

- $180+ in annual revenue

- 680+ credit score


Types of SBA loan

- SBA7(a) Loan Program is the most common as it is the most flexible in regards to what the capital can be used for. Essentially any business expense can be covered by this loan.

- SBA CDC/504 Loan Program is more specific, lending towards fixed assets such as a new building, building improvements, building renovations such as furniture and interior construction, long term machinery etc.

- SBA Microlaon Program This loan is typically for small or disadvantaged business's that are loaned through a intermediary non-profit.


Pros

- SBA backing

- low down payment

- fair interest rates

- provided for wide range of business purposes


Cons

- typically not available to new or low-credit score business's

- long approval times

- a lot of paperwork


To learn more about Small Business loans or to apply for one, you can visit our funding partner Fundera



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