What Can an SBA Loan do for Your Company?

SBA loans help entrepreneurs fund their businesses. Their rates are low, and the loans are long-term, which allow you to refinance your debt or to acquire inventory, equipment, or real estate needed for your business. In fact, it’s one of the lowest-rate financing options available, making it an excellent way to fund your small business. The loans are guaranteed by the Small Business Administration (SBA), a federal agency, and while lenders are given the flexibility to offer low interest rates and variable terms, these loans are difficult to quality for. Despite this, it is worth doing the research and preparation to secure this loan.

The SBA can guarantee 75% of loans of $150,000 or more and 85% of loans of $150,000 or less. It can be good if you want to open a new location for your business or hire more employees. SBA loans have a maximum interest rate of 6.75% for loans of more than $50,000 and terms of seven years or less. For longer-term loans of higher amounts, the maximum interest rate is 7.25%. The loan term depends on what the money is used for. Real estate purchases have loan terms that can go up to 25 years. For new equipment purchases, that can be up to ten years. For daily operations or working capital needs, the terms are usually seven years or less.

SBA loans are available for for-profit businesses that do business in the United States or its territories. When all other financing options have been exhausted, meaning the business owner cannot acquire funds from any other financial lender, and the owner has invested money or time into the business, the business is eligible. The business must also have a sound business plan and the ability to repay the loan. It must also meet the size standard and be determined to be a small business.

Some loans require counseling and education so that the small business owner has support in starting and running the business. In general, the loans have lower down payments and flexible overhead requirements. In some cases, no collateral is needed for the loans. The most common SBA loan, the 7(a) loan program, is available for existing small business and startups for general business purposes. The CDC/504 loan programs are designed for those who need to acquire large assets, such as buildings and land. The microloan program offers very small loans to use for working capital or purchase of furniture, supplies, inventory, machinery, fixtures, or equipment. In any case, SBA loans are available to help small business operate and grow.

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