Things You Should Know Before Applying For an SBA Loan
SBA loans are attractive to small businesses due to their lower interest rates and greater flexibility. For new business owners, however, the lengthy application process as well as lengthy approval processes can be daunting. We have put together a list of things to remember before applying for an SBA loan. Continue reading to learn more about these loans. They can be used for almost anything! Be prepared to give some guarantees.
SBA loans offer low interest rates
Many small businesses need financing and the SBA has been a vital source of it for decades. SBA loans come with risks as with all debt-based financing. The variable interest rate and the benefits of the loan will have to be weighed against each other. The following information will help to evaluate the risks of an SBA loan and how they may affect your business.
They are facilitated by SBA-approved lenders
SBA-approved lenders are required to follow certain requirements and regulations. These lenders must have a proven track record and a relationship with the government. A PLP lender has access and resources that banks don’t have. Because of their relationships with the SBA, the PLP lender can offer loans to small businesses at lower interest rates and with better terms. They can also help borrowers buy commercial real estate for as little as 10% down.
They can be used for just about anything
An SBA loan is a small-business loan that can provide $30,000 to $5,000,000 for a variety purposes. Businesses that meet certain requirements can use the money for almost any purpose. To qualify, they must have a strong credit rating and a solid business history. In order to obtain financing, borrowers must provide collateral. This usually consists of real estate. The repayment terms can be up to 10 years and are low, as interest rates are typically five to 10 percent.
They are made easier by long application processes
The application process for an SBA loan may take up to ninety days. Lenders typically take sixty to ninety days to review a loan application. However, this time can be extended if the lender requests additional information. Lenders use third-party packagers to act as liaisons throughout the process, but it is still essential to understand the process and find the right lender.
They require personal guarantees from owners of at least 20% of a company
SBA loans usually require personal guarantees from at minimum 20% of the company’s owners. Lenders can reduce their risk by offering personal guarantees. The government will reimburse them for some losses if the company defaults. Before you sign a personal guarantee agreement, make sure to read the terms carefully and consult an attorney.