Are you exploring the different financing options for funding your business? Have you considered SBA loan options and wondered how to apply for SBA loan? No worries!! In this guide, you will learn about the complete procedure, benefits, and much more about SBA loans. Keep reading through to learn more!
What is an SBA loan?
SBA loans are government-backed small business loans that are usually taken to cover the startup costs, expansions, real estate purchases, and much more. Although the private lenders provide the financing, they have the backing of the federal government. Lenders, including banks or credit unions, are the direct contact to apply for SBA loans. If the borrower defaults on the loan amount, the lending institutions chase the government to get paid the guaranteed amount.
The SBA loan has strict approval standards but possesses flexible terms of the loan. It also essentially demands the business owners to have at least 20% ownership in a company for availing of SBA loans.
What are the benefits of opting for an SBA loan?
Decent Interest Rates
The interest rates of small business loans are quite competitive and allow businesses to opt for the best suitable lender. However, you must not confuse the decent interest of loan amount with APR on loan. APR includes all loan fees in addition to the interest rate, which shall be paid by the borrower. Therefore, assess all the costs related to a small business loan mindfully before making a final decision.
Longer Loan Term
Another prominent benefit of opting for an SBA loan is that it offers a loan term of the loan, allowing borrowers to repay it conveniently. This helps businesses with the availability of more money for other business needs. The term of the loan is decided on the basis of the utility of the loan amount. For example, the SBA loan is roughly offered for 10 years to buy business equipment or opt for a working capital or inventory loan. Similarly, you get to avail SBA loan for around 25 years if you are investing in commercial real estate property.
How to apply for an SBA loan?
The first and foremost thing you need to ensure the eligibility of your business. This includes analyzing the business needs as well as finding out whether your business will be able to pass the eligibility criteria. The deciding factors of eligibility include strong annual revenue and a good credit score of above 690. In addition, your business must not be in the struggling phase and should have a consistent cash flow in the business account to stand eligible.
Gather Relevant Documents
Now that you have validated that your business stands high chances of getting an SBA loan, the next step is to gather the relevant documents. You must have all the documents mentioned in the loan application checklist handy, including the tax returns and business records. Additionally, other essential documents required are:
- Personal tax returns
- Business license
- Cash flow projection of business for the previous year.
- Personal financial statement
Connect With A Lender
Now that you have arranged and sorted all the document proofs required for an SBA loan, it is time to connect with a suitable lender. Contact an experienced lender with multiple years of SBA experience to get better guidance. After finalizing a lender, apply for the SBA loan and wait for approval.
Choose to get a small business loan to address the financial needs of your business!