Nuts and Bolts of SBA Loans

When you own your own business, you may be surprised at all the expenses that come with it. If, however, you are able to secure funding, whether through lines of credit or loans such as SBA loans, you can cover these expenses while still operating your business as usual. The Small Business Administration (SBA) guarantees loans for business owners in order to provide a low interest option for borrowing money for a variety of reason, including equipment, land for construction or expansion, start-up costs or natural disaster relief.


SBA loans are federally guaranteed loans that provide business owners with extra capital to start, expand or repair their business. There are four basic types. The SBA itself processes disaster relief loans, allowing businesses to recover from damage that occurs as the result of bad weather. Banks and similar lenders can process a 7(a) loan which the business owner can use to make general purchases or expand. Private and non-profit lenders can assist with a 504 loan, which can be used to buy property or land on which to build it. Microloans for general funds or start-up costs can be issued by community-based non-profit lenders.


Being approved for SBA loans isn’t easy. The personal finances of every owner and top management are taken into consideration when you apply for this type of loan. You must fill out the SBA borrower information form and provide copies of various financial documents such as personal and business income tax returns from the previous three years, personal financial statement and history and your business certificate and lease. Your personal assets can be affected if your business defaults on its loan, so that is also something to take into account. If there is any chance that your business will not be able to cover the loan payments, this is probably not the best funding option for you.


If your business is in good standing, however, SBA loans offer low interest and long terms so that your payments aren’t so daunting. Lenders are able to offer these great terms because the majority of the loan is guaranteed by the SBA, which lowers the lenders’ risk considerably. When you are searching for a lender, it is important to take into account the lender’s experience with these particular loans. Make sure to ask how many loans they generally make and the typical range of the loans in dollar amounts.


If your business is in good standing, and both you and your business have great credit, you may be looking for ways to grow. An SBA loan may be the best option for funding various expenses or giving yourself some wiggle room in your available capital.

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