Many experts recommend that small business owners look into Small Business Administration loans for their financing needs. SBA is a government agency focused on helping small businesses succeed. SBA loans offer many options for small businesses. Let’s take a look at the different lending options and the advantages of using SBA.

Loan Guarantees

Technically speaking, SBA is not a lender. They have working relationships with lenders across the country. These lenders have an underwriting process for applicants working with SBA. You will also undergo an underwriting process by SBA. Once approved by the lender, SBA guarantees your loan. This guarantee assures the lender that if you default, SBA will repay the loan.

Loan Options

With the 7(a) loan, SBA guarantees up to 90% of your loan amount for almost all types of business expenses. You apply for up to $5 million, and you select your term for up to 25 years. These are highly sought-after loans.

A 504 loan is primarily given to businesses investing in new structures or large equipment. Businesses can also choose to modernize their existing buildings or land with these loans. The maximum you can borrow is $5 million.

SBA guarantees microloans to certain not-for-profit childcare centers and other small businesses. These are typically for smaller investments. You can apply for up to $50,000. These loans allow you to purchase supplies, machinery, and equipment. Some lenders allow you to refinance debt with a microloan.

Loan Advantages

One of the greatest advantages of SBA loans is that they are customized for the unique needs of a small business. Banks feel more comfortable offering a loan to a business that has gone through two rigorous reviews. They are more flexible with approval and terms, knowing the loan has a guarantee.

You have the option to select the appropriate amount of money for your business needs. These loans allow you to decide if you want a larger loan for more expensive projects. Some businesses may finance only a portion of the purchase price and pay cash for the balance. Either way, the terms of the loan provide a maximum cap on the interest rate. This gives you greater control of your finances as you pay off the loan.

Using SBA loans can be part of a well-developed, strategic financial plan. While there are many different options available to you, working with an organization that focuses solely on the needs of small businesses can help your business grow stronger.

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