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This is a useful blog to read if you are reviewing your options for a small business loan. The information gives a clear breakdown of Government-backed SBA loans and has been brought to you courtesy of "Natural Intelligence"
What is an SBA Loan?
SBA loans are loans issued by private lenders and backed by the U.S Federal Government’s Small Business Administration (SBA). These fixed-rate loans are designed to make it easier for small businesses and entrepreneurs to get financing.
More than 800 lenders, community development organizations, and micro-lending institutions are authorized to issue SBA loans. Under the SBA’s 7(a) loan guaranty program, the lender provides the loan and the SBA promises to pay the lender a portion of the loan if the borrower defaults.
Having government backing allows lenders to take on more risks when it comes to providing loans to small businesses. In the 2018 financial year, lenders issued a combined $25.4 billion in SBA loans.
How to Choose the Best SBA loan For many businesses, an SBA loan is a way to get a lower interest rate than a regular business loan.
There are 2 reasons for this:
What are the SBA Loan Requirements?
The Small Business Administration sets rules and guidelines that lenders must follow when issuing SBA loans. To qualify for an SBA loan, a business must be a for-profit business located in the United States or its territories. The business owner must have invested their own time and money in the business and must have exhausted all other financing options. In addition to standard 7(a) loans, some lenders offer 2 other types of loans, subject to different requirements. These are 7(a) small loans, up to $350,000; and SBA Express, up to $350,000, with a turnaround time of no more than 36 hours.
The SBA last updated its guidelines for standard 7(a) loans in 2018. Business owners should be aware of these requirements:
Applying for an SBA loan typically involves a lengthier application process than for a regular business loan. The following is a list of thing lenders may take into consideration:
Alternatives to SBA Loans Small business owners may only apply for an SBA loan after exhausting all other options. Here are a few loan types to think about first.
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