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A Small Business Administration-backed loan, or an SBA business loan, can help your business to get working capital to accomplish any goal, like expanding, purchasing/refurbishing equipment, taking on new real estate, or refinancing an existing mortgage or agreement, and more.
SBA loans are one of the most desirable and sought-after types of business loans. Many small business owners apply for SBA loans before exploring other similar options. Between lower interest rates and substantially longer repayment terms, SBA loans tend to give you the funding you need without disrupting your cash flow.
While you can get SBA financing through both financial institutions like traditional banks and online lenders, they aren’t taking all of the risk. These loans are guaranteed through the SBA, a branch of the government dedicated to fostering stronger small businesses.
Through most lenders, SBA loans come with one drawback: it can take forever (up to 8 months) to complete the process. Banks thoroughly review loan applications, business plans, personal credit score, and more before providing an answer. When you use an SBA loan to drive revenue in your business, it can significantly improve cash flow.
Small Business Administration loans come in a variety of shapes and sizes, with each option offering a unique set of benefits to borrowers. Here are the three main types of loans offered by the SBA:
SBA 7(a) loans are the SBA’s most common loan program. It provides up to $5 million in funding for a variety of business purposes, including working capital, equipment purchases, construction/renovation, and other growth investments, with repayment terms of up to 25 years.
This type of SBA loan can only be used to promote business growth and job creation, which includes the purchase/construction/improvement of
SBA 504 loans can’t be used for working capital, inventory, refinancing debt, or speculation/investment in real estate rental properties.
The SBA’s microloan program offers up to $50,000 in capital to qualified borrowers. While you can’t use the funds to pay existing debts or purchase real estate, you can use a microloan for any other business purpose, including working capital, equipment, payroll expenses, and much more.
If you’re looking to use an SBA loan for any purpose other than acquiring an existing business, here are the standard requirements:
If you’re looking to use an SBA loan to purchase an existing business, the requirements are:
Your business, or the business you’re looking to purchase, must also fall within the SBA’s overarching eligibility criteria. Outside of the traditional minimum credit score, time in business, and annual gross sales requirements, your business (or the one you’re looking to purchase) must:
It’s important to know if your business qualifies BEFORE sending an application. That way, you won’t wait months only to find out you were ten points off the minimum credit score requirement, and you can avoid wasting precious time you could have spent running your business.
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