Indubitably, SBA loans are the best for those looking to finance their startups. The federal agency guarantees them and this allows lenders to give the loans to businesses at low rates and flexible terms. Getting this loan can help you to grow your business without suffering from crippling debt.
SBA loans are the most popular form of financing from the federal agency. The big downside to these loans is how tough they are to acquire. The SBA’s requirements are strict and applicants have to meet the underwriting criteria of the bank that is providing the loan.
Moreover, the application process is rigorous and some kinds of small businesses are not eligible. For these reasons, many businesspersons have become disillusioned. However, if you manage to get it, its low yearly percentage rates make it the best option for funding your business.
What is an SBA loan?
A small business loan is issued by the participating lenders and guaranteed by the SBA. The small business administration can guarantee up to 85 percent of loans for less than $150,000. The maximum amount offered by the program is 5 million dollars.
If you are looking to open a new business location or hire employees, this loan is a great funding option. SBA loan terms and rates are usually more manageable than those of other financing options. The participating lenders usually set a final interest rate according to SBA rules and a small markup rate referred to as the spread.
If your loan is more than $50,000 and your term is less than 7 years, your rate will be based on a prime rate plus a maximum spread of 2.25 percent. The term of your loan depends on how you will use the money.
Daily working capital – if you use the money for this purpose, you will have 7 years to pay it back.
Buying new equipment – money for buying new tools should be paid back in 10 years.
Real estate purchases – money for buying real estate has a term of up to 25 years.
The longer your loan term is, the lower your regular payments. This means more disposable income for other business needs. SBA loans can dig you out of a damaging financial situation.
How to apply for an SBA loan
You should start by checking out the SBA site, which has a loan application checklist. Use the checklist to organize your documents, including business records and tax returns. After that, you can ask your regional SBA district office to tell you some approved lenders’ names, so that you can get in touch with them.
The SBA has a program known as SBA express, which aims to approve loan applications within 36 hours of application. Therefore, if your small business finances and credit are in good shape, you can get a fast small business administration loans. If you are applying through banks, you need to work with a lender who knows how to process SBA loans.
Here are some questions that you should ask your potential lender:
– How frequently do you finance SBA loans?
– What is the dollar range of your loans?
– How many SBA loans do you make?
Where can I find SBA loans online?
Although banks are the most well-known place to get SBA loans, you can now get yours through your PC. The web has made the application process a lot easier. The top options for online loan application are Live Oak Bank and Smartbiz. To qualify for an online SBA loan, your business and personal finances need to be solid.