How SBA loans are saving Small Businesses in the USA
The American dream of owning and running a business it's alive and well and there are new records of opening new businesses across the United States. In the last 12 months, a lot of small businesses have faced challenges because of the reduction of credit lines by banks, and tightening the credit criteria, which makes operation a business even harder.
Thankfully, there is a promising solution for these small businesses, which is SBA loans. The Small Business Administration offers some of the most affordable finance options when it comes to working capital, debt refinancing, equipment financing, and commercial real estate.
Let's see how SBA loans are making a big difference and how they might be the right choices for your business.
What are SBA loans?
SBA loans are guaranteed by the US government, this guarantee reduces the risks for lenders, making them more comfortable to provide loans to small businesses. This partnership allows more small businesses to get access to low-interest funding with better terms to grow or sustain their business.
Benefits of SBA Loans
Low interest rates: One of the main advantages is that SBA Loans offer lower interest rates compared to most of the options in the market. This helps companies to keep the margin and save cash.
Longer-term payment: SBA loans usually have longer payment terms and lower monthly payments that can help with your cash flow management.
Flexible use: Funds can be used for different business needs such as purchasing equipment, debt refinancing, working capital, and buying commercial real estate with better conditions than conventional loans.
Easier Qualification: SBA guarantee is reducing the risk for lenders and businesses have a better chance of getting funding rather than regular banks.
How SBA loans are supporting Businesses
Working capital. Having enough cash for daily operations and covering unexpected expenses is one of the most important things that can keep a business running, especially in the current economic conditions when banks are cutting lines of credit to lot of clients without notice. SBA working capital loans will help with necessary funding to cover, operation expenses, payroll, marketing, inventory, and other expenses. This type of loan can be a lifesaver for your business.
Financing Growth and Expansion
Most people think that SBA loans are only about survival, but they are also for growth. If you're looking to grow and expand your business, open new locations, and buy new equipment or commercial real estate SBA loans provide great financial support to achieve your business goals. Lower interest rates and longer terms help your businesses to be more manageable.
Debt refinancing
For businesses struggling with higher monthly payments and higher interest rates, SBA could be your way out. After refinancing your debt you can reduce the monthly payments up to 50% and lower your interest rates, this will help to increase your cash flow and have a solid structure for your business.
Supporting almost any business including start-ups looking for working capital to establishing businesses interested in expanding, SBA covers a lot of needs for small businesses nationwide. They are very useful, especially for industries that are considered high-risk by traditional lenders such as transportation, restaurants, retail, and hospitality.
Types of SBA loans
There are a couple of types of SBA loans, and each one is designed to cover different needs:
7(a) loan: This is the most popular SBA loan, and can be used for multiple purposes such as working capital, equipment financing, debt refinancing, and commercial real estate.
504 loan: This loan is designed for buying major fixed assets like commercial real estate or equipment.
Micro-loans: These loans are typically under $50,000 aimed to help small businesses and non-profits.
Recent success stories
One of our recently funded deals was for a restaurant that was struggling due to the slow season and increase in operating costs. Local banks were unwilling to extend additional credit, the owner applied for an SBA loan, and we were able to refinance some of the existing debt with better rates and longer terms and also provide additional working capital to cover the operations. The restaurant was able to survive and expand its operations.
How to apply for an SBA Loan
Applying for an SBA loan can be an easy process if you prepare yourself. Here are some steps to get prepared for:
Define your needs: Understand why you need the loan and how your overall financial structure and position will change, you must understand the pros and cons in order to make an educated decision.
Prepare your documents: Get your financials in order and make sure everything is clean and transparent, the better your financials look the higher your chances of approval and closing with less frustration.
Find a lender or a broker: Look for SBA-approved lenders or contact Brokers like Us Business Funding that have access to multiple SBA funding sources and can help you with consulting during the funding process.
Submit your application:
Complete the application and submit the necessary information in order to get the pre-approval, once you get approved make sure you are available because the underwriter will ask multiple questions about your business in order for them to make sure you will be able to afford the new funding, also they will ask for additional documentation.
Conclusion
In times of slow economic activities, SBA loans have been a lifeline for many small businesses, for multiple decades. SBA loans come with flexible affordable and accessible options that can help your business not only survive but grow as well. If your business has fewer cash reserves, or looking for growth opportunities, an SBA loan can be one of the best options in the marketplace. That's been the situation for the last four months for multiple industries choosing SBA loans over traditional options because sometimes SBA loans are the only options.
For more information on how you can take advantage of SBA loans and how they can benefit your business contact us at any time. We are here to help you get the best financing options for your business with less frustration.
