SBA

What are the benefits of a SBA loan?

What are the advantages of a SBA loan? Hint! There are a number of benefits . It is one of the best business loans for small business in America.


What are the benefits of a Small Business Administration, SBA loan? This is the second part of our SBA series. The first part looked at the interior a SBA loan with a bit of the history. Now we will analyze some SBA loan advantages. 

As we previously detailed, SBA does not make small business loans. Approved individual lenders make SBA loans, which are typically guaranteed in part by the U.S. Small Business Administration (SBA), a federal government agency.

SBA LOAN BENEFITS

Favorable Interest Rates

Since SBA guarantees a portion of the loan, banks are more willing to provide low interest rates. Unlike traditional bank loans and lines of credit, these rates are set lower to support small business owners. Your interest rate will depend on your own creditworthiness and the qualifications you bring to the table. Favorable rates are a huge SBA advantage.

                        SBA-504-loan

Longer Repayment Terms 

By spreading out payment terms over a longer period of time, businesses conserve vital working capital. SBA loans terms can rage from 10 years with the 7a programs to 25 years with the CDC/504 loan.

 

No Ballooning Costs

When repaying an SBA loan, you will have predictable monthly payments. The ability to accurately access your costs is essential  when running a small business.

 

New and Established Businesses Can Apply 

SBA loans can be used to start a new business or expand an existing one. Businesses in practically any industry can apply. They must however meet the SBA’s size regulations are Yes, franchise businesses can also apply.

Lower Down Payment Requirements 

Although SBA loans  often requires a down payment, it is usually lower than many other types of loans. That’s one of the great advantages of SBA loans. You will typically need a 10%-20% down payment for an SBA 7(a) loan or a CDC/504 loan. An SBA microloan doesn’t require a down payment at all. Other types of loans might require you put down up to 30%. .

Flexibility of Use

SBA loans give you broader use of what you can do with the capital. With an SBA 7(a) loan, you can use the funds for almost anything. The terms of use for SBA 7(a) funds are fairly wide. You you can refinance existing debt, buy land, purchase inventory, make upgrades. 

Conversely,  CDC/504 loans are quite a bit more rigid.  They are usually for fixed assets including real estate and equipment not working capital loans—they’re. SBA microloans also have specific requirements around their use.

PART III will go into the specific types of SBA loans.

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