Are You an Entrepreneur Considering an SBA Loan? Here Is What You Need to Know

Are You an Entrepreneur Considering an SBA Loan? Here Is What You Need to Know

When you own a business, one of the funding options you have is an SBA (Small Business Administration) loan. SBA is a government agency that helps businesses secure the financing they need for operations and growth. The main way that SBA does this is through an SBA loan program.

Understanding an SBA Loan

The SBA does not lend money directly to small businesses. Instead, it partners with credit unions, banks, and micro-lending institutions to offer loans. However, it sets guidelines on the terms of these loan products. The SBA guarantees the lenders that a part of these loans will be repaid. That means if the borrower defaults on an SBA loan, the government will still pay the lender.

The SBA regulates how much one can borrow and at what interest. These loans usually have lower interest than most lenders offer.

Eligibility for an SBA Loan

You will have to provide thorough financial documentation about your business to both the SBA and the bank. This is for them to check if you are a good candidate and if the loan is the right fit for your business. Since there are different types of SBA loans, each has different qualifications.

When applying for the loan, besides the interest, you will pay the application fees, guarantee fee, credit check fees, and appraisal fees, if it is a real estate loan. You can apply for an SBA loan via your local bank, as this is the easiest way. Most banks have designated representatives that deal with this type of loan. Another alternative is visiting a Small Business Development Center near you, which also has an SBA rep to guide you.  

Benefits of an SBA Loan

Here are a few advantages of an SBA loan:

Lower interest rates
Easier qualification
Flexible payment plans
Longer terms

Drawbacks of an SBA Loan

Some drawbacks of an SBA loan include:

It can take a longer time (60 to 90 days) to get the loan
Your business should be more than two years
A guarantee fee is charged
You need to show a solid business plan

At Skogen Capital Lending, we offer SBA loans to different types of businesses. If you need financing to expand, grow, acquire machinery, or any other business need, give us a call to discuss your options.