What You’ll Need to Apply for an SBA Loan:
SBA loans have a few notable benefits, such as:
- Low Interest Rates: Starting at 7.75 percent
- Long Repayment Terms: Ranging from 5 to 25 years.
- Usage Flexibility: In particular, the SBA 7(a) loan can be used for various costs, such as inventory, equipment, real estate, refinancing debt, and expansion projects.
- Less Risk for Lenders: Because the loan isn’t fully provided by the SBA, it’s less risk for both them and the bank. Due to this, it can be easier to qualify for SBA loans.
In addition, there are numerous types of SBA term loans, which we’ll detail below.
Questions to Ask Before Applying for an SBA Loan:
How SBA Loans Are Different From Other Financing Options:
Before applying for an SBA loan, you should make sure that you weigh your options. Here are some other financing options that small business owners pursue, and how they differ from SBA financing.
Credit Cards: One notable benefit of business credit cards is that they rarely have usage restrictions. However, as previously mentioned, there are some restrictions on how you use certain SBA loans. Another difference between SBA loans and credit cards is that credit cards have higher interest rates.
Merchant Cash Advances: When you receive a cash advance, you’ll receive a lump sum in exchange for a percentage of your business’s future credit card sales. Unlike SBA loans, this product doesn’t have set repayment terms.
Lines of Credit: With a line of credit, you’ll have access to a certain amount of financing, and can draw up to the limit. The terms aren’t as strict, and there’s typically no restrictions on how you use it.