The Benefits of SBA Loans
Small business owners frequently need financing to help grow their companies. With the right capital, it’s possible to purchase equipment, buy real estate, invest in a website and take other steps to get ahead of competitors. Among the most popular loan options are SBA loans. What makes them so attractive?
Low Interest Rates
It’s almost impossible to beat the interest rates on SBA loans. Because these loans are backed significantly by the federal government, banks have less risk to worry about. Your final interest rate depends on your credit score, but you can expect great rates with an SBA loan. This gives you access to valuable capital, long repayment terms and low interest, which is a winning combination.
Flexible Repayment Terms
An SBA loan gives you plenty of time to pay back the capital you borrow. Unlike alternative financing, which may only extend you capital for a period of a few months or years, loans backed by the SBA offer terms of up to 25 years for real estate purchases. Equipment loans give you about 10 years for repayment, and working capital financing offers a similar schedule. This is a big help for fitting comfortable loan payments into your monthly business budget. You get the things you need to grow your business without feeling weighed down by payments.
Smaller Down Payments
Down payments involve using your business savings to take care of a portion of the sticker price of equipment, real estate or other items. For example, if you want to buy a piece of property worth $200,000, you may need to make a down payment first of 20%–30%, or $40,000–$60,000. With an SBA loans, you may be able to qualify for a down payment of only 10%. That could save you $20,000 or more in working capital to use for other purposes. This is a large benefit for small businesses and startups that don’t have tons of money set aside in savings.
High Capital Availability
With traditional loans, lenders may hesitate to give you large sums of money, unless you have an equally valuable piece of collateral. This can make it hard for small business owners to purchase big-ticket items they need, such as real estate, heavy machinery and company vehicles. However, the reduced risk associated with an SBA loan means it’s much easier be approved for financing of $100,000–$500,000 or more.
It’s true that getting an SBA loans means having patience. After all, you need to fill out forms to demonstrate that your company is really a small business. It also takes a while to get approval. For many small business owners, however, this is a small price to pay for such amazing financing benefits.