5 Facts About SBA Loans

Over the last several years, the U.S. Small Business Administration (SBA) has had the privilege of helping rebuild the American economy. Their efforts have helped to distribute $19.2 billion in this last year alone to small businesses. If you are looking to grow your business, then check out these tips when considering an SBA loan.

  1. Commercial Lenders Originate Loans

The SBA does not make the loans, but they do make the rules that the lenders are required to follow. Commercial banks offer the SBA loans while the SBA guarantees them to a certain percent.

  1. What This Loan Entails

The most popular loan type is the 7(a) loan program. Recently, the SBA has tried to add more flexibility to their programs to offer more choices to the lenders and borrowers. Here are some of the standard SBA loan terms:

  • 7-25 years – Debt refinancing
  • 7-10 years – Equipment
  • 25 years – Commercial real estate occupied by the owner
  • 7 years – inventory
  • 7 years – working capital
  1. The Interest Rates Can Vary

Interest rates and fees will depend on the size of the loan that you take out. Most fees average between 2% – 2.7% of the total amount. Keep in mind that this does not include the credit reports, appraisals and more. If your loan is $125,000 or less, the SBA will waive the fee for the loans that fall into that category. This can help you save a large amount of money.

  1. SBA Loan Benefits

These loans generally have a longer pay period than other loans, and you do not always need a large amount of collateral for them. The down payments are generally less than what the bank would expect from a commercial loan. The SBA loans backing guarantee is helpful when persuading the lenders to agree with the loan details. The bank assumes less risk in the event a borrower default, because the SBA will replenish a partial amount on the funds.

5.Applying For The SBA Loan

If your local bank does not offer financing for your business, then you can contact the local SBA office to find an lender for your location. SBA loans are great options for start-ups or franschises. If you are looking to start a business from the ground up, you will want to have a detailed business plan with you. If you already have a business, be sure to bring all your financial statements and your business plan for the upcoming year.


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