6 Benefits of SBA Loans

When you’re a small business, it can be difficult to get the funding you need. Big lenders may see you as too much of risk while alternative options may offer attractive terms. Fortunately, SBA loans are designed to help small businesses and start-ups with their unique challenges. In fact, here are six ways you can benefit from an SBA loan.

1. You Can Use SBA Resources

The Small Business Administration is a federal agency dedicated to helping owners of small enterprises; supporting SBA loans is just one of the ways it achieves this goal. It also offers mentorship and training programs to give you all the tools you need to be successful.

2. You Can Get Better Repayment Terms

The longer you have to pay off a loan, the smaller you can make the monthly payment. This can give you more available cash to actually put into your business. It may also give you some peace of mind knowing the next payment amount is manageable.

3. You Can Access More Capital

Some lenders may hesitate to let you borrow large amounts due to the risk. This may mean scaling down your plans or even seeking multiple loans to reach the full amount. SBA lending is more likely to lend those big amounts without slapping on a ridiculous APR.

4. You Can Put Down Less Money

You’ll likely have to make a down payment on your SBA loan, but it’ll probably be less than that of other loan types. Usually, you only need to pay down 10% to 20%, compared to the 30% usually required on traditional lending. Since you’ll probably have a longer repayment term as well, you don’t have to worry about the small down payment making your monthly payment unmanageable.

5. You Can Get Lower Interest Rates

Risk and interest rates are closely connected; the higher the risk of default, the higher your interest rate is likely to be. This closes the door for many small businesses because they can’t afford the APRs offered by traditional lenders. An SBA loan usually offers lower rates

6. You Can Use the Funds for Almost Anything

SBA loans offer a huge degree of flexibility. Many alternative financing options limit how you can use the funds; you may only be able to purchase real estate, for example, or invest in equipment. With an SBA loan, you can usually put money where it’s most needed, whether that’s in daily operations or an opportunity for growth.

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