The Advantages of Getting an SBA Loan

If you’re a small business owner, it’s likely that a good portion of your time is spent on figuring out ways to increase revenue and grow your company. There are many ways that a company can do this and it’s always important to explore all of the options available to figure out the best fit for your business. One of these ways is to obtain a Small Business Administration (SBA) loan.

The SBA is a federal agency that was created to help small businesses grow and develop. One of the ways in which they do this is by guaranteeing loans for business owners nationwide. However, the SBA does not actually provide the loans themselves. Instead, the SBA guarantees the repayment of a large portion of a bank loan made to a small business.  By doing this, the SBA reduces the risk that the bank is taking in making the loan.

SBA loans are secured through lenders, like banks, who follow the guidelines and requirements set by the SBA. Some banks are qualified as “preferred lenders” and can make the decision that the SBA will guarantee the loan without having to add SBA processing to your loan timeline.  You would apply for the loan through a qualified and participating lender and obtain your funds from them as well. So what else is there to know about SBA loans? Is this type of loan right for your business? Although that is probably a conversation for you and your advisors, we’re here in the meantime to discuss some of the basics on SBA loans.  And when you get that SBA guaranteed loan, Wilson Law Group can assist with closing it.

How do you qualify?

If you own a for-profit company that has been in business for over 2 years, then this type of loan might be right for you. Although there are actually a lot of prerequisites in order for you to qualify, like meeting credit score thresholds and providing collateral, there are many advantages to applying for this type of loan.

What are the advantages?

SBA loans have lower, fixed interest rates.  There are various types of SBA-guaranteed loans that can be used for business or building acquisition, inventory or cash flow.  They also have flexible terms within the various loan programs, so you can work with your lender to set parameters that you feel comfortable with—like low, interest-only payments for a period and other repayment terms so you can keep payments low and maintain your cash reserves.

Another advantage is if you aren’t looking to take out a very high loan, then you might be able to skirt past some requirements because the SBA characterizes its loans based on the needs of the business. For example, loans under $250,000 require less paperwork, provide options for collateral like inventory and equipment, and even an unsecured line of credit option for loans under $100,000. The SBA tends to consider loans that would be over $250,000 for businesses that are looking to purchase real estate or acquire another business. It makes sense that there would be more requirements that go along with a loan of that size.

There are also additional advantages for veterans. In some instances, SBA fees are waived for veterans applying for loans up to $350,000 for business that are 51% or more owned by veterans who fall into certain categories.

You also have a long time to pay back the loan, with the SBA offering repayment terms of up to 25 years. You can also use your loan for a variety of different purposes, from everyday operational needs to using your loan to fund a large purchase.

Consult with an experienced business law attorney.

At Wilson Law Group, we want to see your business thrive. We regularly work with our business clients to help them figure out what is best for their company. If you own a small business and are considering a SBA loan, please don’t hesitate to contact us today!

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Wilson Law Group

Jim Wilson is the founder and principal attorney of the Wilson Law Group. For the past 25 years he has been combining legal dexterity with an entrepreneurial mindset to help aspiring and established business owners start, finance, buy, sell, and run their companies.

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