Starting and growing a business is not an easy feat, especially without sufficient funding. This is where Small Business Administration (SBA) loans come in. Most small business owners have heard of SBA loans, but what exactly are they? And how do they differ from other types of business loans? In this blog post, we will cover all you need to know about SBA loans.
What Is an SBA Loan?
First, let’s define what an SBA loan is. SBA loans are loans guaranteed by the U.S Small Business Administration to small business owners. Unlike traditional loans, the SBA loans do not come directly from the SBA but are instead offered by participating banks, credit unions, or other lenders. This means that the SBA does not directly lend money but rather sets guidelines for lenders to follow while the loans are administered.
The goal of SBA loans is to support small businesses and help them access funding that they would otherwise not get.
SBA loans come in different forms. The most popular type of SBA loan is the 7(a) loan program, which offers small businesses up to $5 million in funding for purposes such as working capital, real estate, or equipment financing.
CDC/504 loans are another popular SBA program that is worth looking into. This type of SBA loan can be used to purchase fixed assets such as properties or machinery.
To learn more about 504 loans, check out our previous blog, “How Are 504 Loans Structured?”
Benefits of SBA Loans
One of the benefits of SBA loans is that they are more accessible to small businesses than other types of loans. SBA loans offer flexible terms, lower down payments, and longer repayment terms compared to traditional loans.
Also, lenders are more likely to approve an SBA loan application because the government guarantees a portion of the loan, reducing the lender’s risk. This means that small business owners with less-than-stellar credit can still access funding to grow their business.
Before you go for an SBA loan, there are some considerations to make. First, ensure that your business meets the eligibility criteria set by the SBA. You should also have a clear plan on how you will use the funds and a repayment plan.
Wrapping It Up
In conclusion, SBA loans are a great option for small business owners looking to access funding without exploding their debt load. SBA loans are not only accessible but are also flexible, thus allowing small businesses to use the funds for purposes such as hiring staff, investing in technology, or expanding their business. However, before applying for an SBA loan, ensure that you understand the different programs available and have a repayment plan in place. Also, take the time to research different lenders to find the best fit for your business.
Gellyfish: Certainty of Execution in Commercial Loans
At Gellyfish Commercial, we offer commercial financing solutions with the certainty of execution you need to take your business to the next level.
We are located in Riverside, and work with clients all over California and beyond. Contact us today by email (firstname.lastname@example.org), telephone (877-800-4493), social media (Facebook, Twitter, LinkedIn), or through the live chat on our home page to schedule a free consultation.