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There are many reasons that you could utilize business financing when you are a small business owner. Whether you want to start a new business, purchase a franchise location, or want to build your existing business. No matter what your situation is, a Small Business Administration (SBA) loan can be a great option to pursue if you need additional capital for your business. In this post, we will discuss five things that you might not already know about SBA loans.
SBA loans have low down payments
The SBA assists businesses by connecting them with affordable financing. Many business owners do not realize that SBA loans have inexpensive down payments. Part of the loan is guaranteed by the SBA so the lender requires less money up front than other types of financing do. Additionally, many SBA loans offer terms that are longer than conventional business loans which means keeping the payments lower and more affordable as well.
SBA loans do not always require collateral
You might be required to put up collateral to get a reasonable interest rate with other financing options. If you do not have a lot of assets to put up for collateral, it can be challenging. Real estate is used as collateral by many business owners which can be very risky.
The SBA 7(a) loan does not require any real estate for other collateral. This program is useful for business owners who wish to start a new business acquire an existing business, obtain expansion financing, or seek equipment financing. Not having to put up collateral when applying for a loan will make the process less stressful and lessen your risk when receiving a loan.
The SBA offers loan amounts up to $5 million
The SBA 7(a) loan and 504 loan programs offer financing up to $5 million dollars. These programs are different so make sure to do research on to see which will be the best fit for your business.
The SBA can finance “special use” properties
While real estate collateral can be an advantage when applying for a loan, not all real estate is created equal. In fact, many properties that are considered “special use” like gas stations, specialty medical businesses, or golf courses, can be hard to finance conventionally. However, the SBA doesn’t typically shy away from these requests simply due to the property type, so this could be a viable option.
The SBA offers disaster recovery loans
Unfortunately, disasters can negatively affect small businesses which leaves them with significant damages. Although insurance companies can help lessen your losses, there are aspects that will not cover your business.
The SBA offers loans up to $2 million dollars that can be used for repairs or replacements of that damage or what was lost due to a natural disaster. Loans in this category can be used for buildings or other real estate, inventory, supplies, and other areas.
The Bottom Line
SBA loans offer a few options that fit “niche” markets that are not as easy to finance in the mainstream lending market. As a business owner, understanding what the SBA offers can help make your search for financing easier.
