The US Small Business Administration or the SBA provides loans to small businesses, which fail to fulfill the eligibility criteria required to obtain loans from banks and other conventional sources. SBA loans aim at strengthening and improving the economy of the nation by supporting the growth of small businesses. There are various ways start-up business owners can benefit from these loans. Let us discuss some of the advantages of SBA small business loans:
- You can conveniently obtain these loans even if you are devoid of properties that can serve as collateral. SBA provides full assistance in such cases by being your guarantor.
- Start-up business owners have little capital. They are more in need of loans at every step of setting up their business than the more established ones. Hence, SBA provides loans at extremely low interest rates to make it easier for them to make debt payments while setting up their business.
- These loans can be obtained fast and without any kind of hassles. You can get them as soon as you apply for them.
These loans cannot be obtained directly from SBA. They merely set up the rules and regulations that are followed by the various banks and private-sector lenders that provide these under the authorization of the SBA. SBA provides various loan programs that are designed to cater to different financial situations. Let us discuss the various SBA loan programs available for business owners:
SBA 504: These can be used for purposes such as construction, renovations, purchasing real estate properties and equipment. They cannot be used for refinancing existing credits. The various advantages of these include:
- More relaxed and flexible lending requirements and eligibility criteria than conventional loans.
- Longer maturity periods than loans obtained from conventional sources.
- Lower down payment requirements on fixed assets.
The amount starts from a minimum of $350,000 with no maximum limit.
SBA 7(a): These SBA loans are obtained for purchasing a new business or expanding an already existing one, purchasing machinery and refinancing existing debts. The advantages of these are almost the same as SBA 504 loans such as:
- Longer maturity periods than traditional loans.
- Reduced down payment requirements on fixed assets.
- More convenient and relaxed eligibility criteria than conventional loans.
Loan amount ranges from $350,000 to 3.5 million.
SBA Express: These can be used for purchasing inventory or vehicles, machinery etc. The various advantages of these credits include:
- Longer maturity period than most conventional loans.
- Easier and more relaxed lending requirements than conventional credits.
Loan amount ranges from $25,000 to $350,000.
There are various banks and private sector lenders providing SBA loans. It should however be kept in mind that all the banks do not offer the same SBA loan programs. Even the lending requirements may sometimes differ based on individual bank policies. Hence it is important for you to choose the right program and an appropriate provider based on your financial situation and requirements.
SBA loans are excellent options for start-up business owners, provided they opt for the right loan program and avail it from the right lending source.
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