Benefits of SBA Loans Every Small Business Owner Should Know
An SBA loan is the best small business loan product on the market. If you are thinking about applying for an SBA loan, you are on the right path. There are various loans for small business owners that allow different paths for how quickly you can get cash in hand. Even though these types of loans are great for many business owners, the advantages of SBA loans surpass them all.
If you can qualify, an SBA loan comes with heaps of advantages over another type of small business loans. Some of the advantages include lower interest rates, longer repayment terms, as well as management fees. It is wise for business owners to build a good business history and credit. Confidently, you will gradually raise the amount you can get a loan via the SBA. Let us discuss some of the primary advantages of obtaining an SBA loan.
Low-Interest Rates
After taking a small business loan from a bank, entrepreneurs worry about how much that loan will cost in the long run. This is because of interest rates for bank loans in a big concern. On the other hand, interest rates for SBA loans are essentially low. In most cases, interest rates depend on the entrepreneur’s creditworthiness and the qualifications they bring to the table. The advantage of SBA loans means that you could be looking at rates as low as 6.75%. Unlike other types of term loans, you will not see interest rates climbing into the double digits.
Capital Availability
Since the recession, banks have become more reticent to lend out even small wads of cash to Main Street businesses. It is no secret that “risk” is a bank’s least favorite word. This puts small business owners in a difficult situation. However, you have an option of getting capital through an SBA loan. One can borrow up to $5.5 million through the SBA loan program. Of course, this means that borrowing a huge sum of capital really is possible. The SBA works with lenders (mostly banks) to guarantee not less than 85% of loans requested by entrepreneurs. Therefore, ‘risk’ is not such a dirty word to the bank. Consequently, more capital is available to deserving entrepreneurs.
Favorable Repayment Terms
A small business loan would not be helpful if the repayment timeline makes you more stressed than you were pre-financing. This makes it necessary for entrepreneurs to ensure they find the right products for their financing needs. In addition, being 100% certain that the repayment terms are favorable and fit for the business’s cash flow is essential. One of the key advantages of SBA loans is their raiment terms. These loans have the longest repayment terms. Lenders offer a payment schedule that does not put a financial strain on your business. For instance, SBA loans allow monthly payments for 25 years for real estate and 10 years for equipment.
Low Down Payments
Sometimes, lenders ask for a down payment depending on the type of financing you are looking for. In most cases, down payments for small business loans mostly come down to the amount of money an entrepreneur is borrowing. Furthermore, it also depends on the purpose of the loan, what kind it is, and an entrepreneur’s financial profile. Notably, the relationship between poor credit and a high down payment is usually direct. It is imperative to note that SBA loans require a down payment. Nevertheless, it is usually lower than other types of loans. SBA loans only require a 10-20% down payment. Moreover, an SBA microloan does not require a down payment at all.
Flexibility of Use
A few types of business loans outline certain strings attached in terms of how borrowers can use the funds. Experts say that that is not a bad thing at all. Of course, if you apply to equipment financing or invoice financing, you are looking for finance that hyper-specific need. However, sometimes business owners need money for varied reasons. This is where the SBA comes in handy. An entrepreneur can use the funds for almost anything. The terms of use for SBA funds are broad. For instance, one can buy land, purchase inventory, refinance existing debt, or make upgrades.
Access to SBA Resources
The SBA is a government administration and does not dispense loans at all. Even though the SBA loan initiative certainly lessens the risk for lenders, their main goal is helping the business owners. That is you! They continuously strive to help you grow your business by providing easy access to capital and education. Some SBA loans offer access to invaluable training and mentorship opportunities. Even if you are not among borrowers approved for an SBA loan, you can still take advantage of resources. State and local-level SBA offices across the country hold seminars, courses, and networking events to assist connect small businesses owners.
You can contact us for more information about SBA loans, how to apply, and the advantages of getting the loan.
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