All you Need to Know about SBA Loans
If you have ever searched for small business funding, you have likely come across something known as an “SBA loan”. All small business owners find it in their interest to know about this. However, if you are new to this form of funding, then below is a guide to help you understand what an SBA loan is exactly, as well as how to secure it for your business.
What Is an SBA Loan?
Simply put, this is a business loan which comes with a partial guarantee from the Small Business Administration, removing some of the risks for the institution which issues it. SBA does not give out these loans of itself. Instead, it works with SBA-approved financial institutions that lend money to businesses more often as well as with better terms, and only partially guarantees the loans which lenders extend to business customers. Lenders too would back up another portion of the SBA loan which they give out. If the withdrawer is not able to repay this, then the lender of choice knows that the Association will cover the portion that it guaranteed.
What Terms Does Such a Loan Offer?
According to the qualifications of your business, and the lender that you choose, the terms you will able to get with a loan would differ. Like any other loan, an SBA loan too comes in many varieties. Amounts can range up to $5.5 million and can carry very low APRs. In addition, SBA loan repayment terms can range up to 25 years, although 10 years is a common repayment term length.
Can I Attain One?
It is pretty tough to qualify for an SBA loan, but some of the general minimum requirements are easy enough to understand. Knowing about them can help a small business owner gauge whether their business has a chance of getting financed. If your own venture meets the below requirements, you would probably qualify for an SBA loan.
- 2 Plus years of history under the belt
- A credit score of 640+ for the business’s owner
- $100,000 plus in annual revenue
Even if you meet these requirements, you only achieve the possibility of acquiring a loan, as opposed to full-blown certainty, because various things can influence your eligibility. With the high loan amounts and low APRs it makes available to customers, as well as the long-drawn repayment options, an SBA loan is a worthy option for most small businesses that need financing.