Business owners who have modest operating budgets have to use their resources very carefully. Likewise, they have to be discerning about the financial commitments that they take on as they pursue funding to fuel development. Small Business Association funding opportunities are one of the most notable advantages that you have in running a company that seems minuscule in comparison to mega-sized corporate syndicates that have enormous operating budgets to work with. Here are some key things that you should understand about SBA lending.
To qualify for an SBA loan, your revenue and assets must be below threshold amounts. The amount differs depending on which type of loan program you’re applying for. However, simply being the little guy doesn’t mean that you’ll automatically qualify for financing by merely throwing your hat in the ring.
Applications are competitive. Lending institutions have fixed amounts to work with, and they can’t extend funding to anyone who asks politely. Furthermore, small business lending involves a high degree of risk, and lenders want to be sure that you’ll be capable of complying with the obligations set forth in a repayment schedule.
You don’t have to apply through a local SBA chapter to get a business loan, and your choices about where to borrow from aren’t limited to your regular banking service provider. There’s a growing marketplace of online lenders that you can approach for funding.
Types of Loans
The right type of SBA loan to apply for depends on how much you need and what you plan to do with the proceeds. The most well-known category of loans is probably the SBA7(A) program. Owners can borrow as much as five million dollars and use the funds for a variety of operational needs such as working capital and equipment purchases.
The SBA Express program is very similar to the 7(A) program. A big pro is that there’s less wait time. The biggest con is that you may borrow only one-tenth of the amount that you could by seeking 7(A) funding.
For capital needs that are less than $350,000, SBA Community Advantage Loans could be a good route. You have to use the proceeds at once and can’t treat the funds like revolving credit, but you can apply the proceeds towards an extensive variety of normal operating costs.
Small business lending has many upsides that traditional commercial financing options lack. Lower interest rates and manageable terms can make small business lending a great long-term decision for your company.
Mai Capital offers SBA 7a and 504 loans, as well as SBA loans for mergers and acquisitions. Contact our team today to get the funding you need.