A Quick Guide to SBA Loans

When it comes to financing options for small businesses, SBA loans are among the most common. They allow an owner to take advantage of flexible terms, interest rates and provide you with an opportunity to grow your business. Here’s what you need to know about SBA financing.

What an SBA Loan Is

An SBA loan is a small business loan that the SBA guarantees. The loan itself is issued by a lender. Normally, these lenders are traditional banks. However, the SBA guarantees a portion of the loan to the bank to lower the bank’s risk. If you need to start up in a new location, hire new employees or refinance a loan, then SBA loans may be a great way for you to get the financing that you need.

Repayment Terms for an SBA Loan

SBA loans have low APRs and also provide you with more time to repay them. Often, the repayment terms depend on how you use the money. For instance, if you use the money for daily operations or working capital, then you have about seven years to repay. If you use it for equipment, you have 10 years and if you use it for real estate, you have 25 years. SBA loans have longer terms and lower interest rates so that you’ll have more money available.

Keep in mind that the SBA does require a personal guarantee from you. You and your personal assets may be at stake if you can’t make the payments on your loan. In addition, anyone who has an ownership stake in your business must provide a personal guarantee also.

How to Get an SBA Loan

If you’re interested in an SBA loan, the best place to start is on the SBA website. The SBA website provides business owners with an application checklist to assist with the application process. Here are some of the documents that you’ll need ahead of time:

  • Personal history statement
  • Personal financial statements
  • Business tax returns
  • Personal income tax returns
  • Business lease
  • Business license
  • Loan application history
  • SBA’s borrower information form

With those documents, you can contact your SBA district office to find out where to find approved lenders. There is also an SBA lender match tool that can help match you with a lender.

An SBA loan is one of the most popular options for small businesses. When it comes to traditional bank loans, many small businesses do not qualify. Small businesses are a risk to traditional financing institutions and SBA loans help alleviate some of that risk and allow business owners to take advantage of lower cost loans.

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