Some small business loans require more time than others. This is true regarding the paperwork involved and the amount of time you must wait to receive the funds.
SBA loans have a long timeline for both, so you may wonder if the benefits of this type of loan are enough to justify the extra effort and time they require. If you have considered applying for an SBA loan, knowing the specific benefits can be beneficial. Keep reading to learn more about what these are.
Low-Interest Rates
When you get a small business loan, you may be concerned about how much it will cost. This is why interest rates are a huge factor. Finding loans with lower interest rates is a top priority, and this is a benefit offered by SBA loans.
In fact, the interest rates for SBA loans are about as low as you can get. The exact interest rate you get depends on your creditworthiness and your qualifications.
Capital Availability
Trying to acquire capital for your small business can seem impossible at times. However, you do have options. While traditional loans and alternative lenders may limit the capital they provide, SBA loans, like the 7(a)-loan program, will allow you to borrow up to $5.5 million. This makes it possible to get the capital you need, which may not be available through other loan options.
Since the SBA works with traditional lenders (usually banks) to guarantee up to 85% of the loans they issue in case of default by a borrower, most banks feel more comfortable providing you with the several million-dollar loans than if you were seeking this funding on your own. With SBA loans, the risk is not bad to the bank, which means more capital is available for you.
Repayment Terms
SBA loans offer longer repayment terms than other types of loans that are available. Also, the payment schedule will not put a financial strain on your business, which makes it more beneficial for your business.
SBA loans provide more cushion. You can receive a repayment schedule of monthly payments for 25 years for real estate, about seven years for working capital, and 10 years for equipment.
As you can see, there are more than a few benefits offered by SBA loans. If you need business financing, be sure to keep this information in mind. It will help you see why this type of loan may be right for your business.