Funding can be hard to come by when you run a small business. Luckily SBA loans are a source of financial help for businesses. Many small businesses struggle to get traditional funding, especially when first launching their company. SBA loans can provide a way for small businesses to get the funding they need to keep their business running.
What’s the Purpose of an SBA Loan?
SBA loans guarantee the loans that lenders write. If something happens and a business cannot pay its loan, then the SBA covers a portion of the borrowed amount. Why is this important? An SBA loan allows a lender to offer a somewhat riskier loan option without the full risk.
SBA loans also offer lower rates with extended time to pay back the funds. That means your business can get better interest and a more affordable payment plan due to the time length of the loan.
Why Would a Business Want an SBA Loan?
There are many reasons a company would want funding. For entrepreneurs or small businesses that don’t qualify for traditional loans, SBA loans are a great way for them to get funding. Because SBA loans pay for a portion of the loan amount if it defaults, lenders are more likely to sign off on a loan. This creates a better opportunity for small business owners to get financing for whatever their business needs.
How Does a Business Qualify for an SBA Loan?
Every loan has eligibility requirements, and SBA loans are no different in that aspect. A few things to keep in mind before applying are listed below.
- Your company needs to be a for-profit business.
- Your company should reflect equity or invested time.
- Your company should have a real need for the loan.
Applying for an SBA loan is a great opportunity to garner the funds your business needs, but it does still take time and effort. Remember to have detailed documentation showing why you need the funds, the other sources you tried and were denied for, and your plan for paying the funds back.
If your small business hasn’t had any luck obtaining funds through the traditional methods, then give SBA loans a chance. Like every loan, you’ll need to qualify, but once you’ve proved your eligibility, obtaining an SBA loan offers a ton of perks for your business. From smaller interest rates to longer terms, obtaining the funds you need has never seemed easier.