Getting loans to kick-start or move your small business forward is a huge help. You might have lots of great ideas, but you have not been able to make them a reality because you don’t have enough funds. The problem in getting loans from banks and established financial institutions is that they tend to be really strict when it comes to approval. You might attempt many times, but your application could still end up getting rejected.
There are also instances in which you are given the loan but at a rate you could not afford or is quite unfair.
An SBA loan is another option. SBA means Small Business Administration, a government agency that extends support to small business owners. The first thing you need to know about SBA is that it does not provide direct loans to entrepreneurs in order to start a business. Instead, it provides guarantees to lending firms and banks on your behalf so your application for a small business loan will be granted. The guarantee means SBA will pay the loans back to the lender if the business owner has defaulted.
When you decide to apply for this loan, you are actually applying for the loan through an authorized SBA lender. Your loans will then be structured according to the requirements of the SBA. On the surface, it means that you can finally have the loans you needed to start your business. Before, your application ran the risk of being rejected because you had nothing to back it up or to guarantee lenders that you were capable of paying it back. Through the SBA, your application is almost guaranteed approval.
Types of loans
The SBA is willing to provide a guarantee to business owners for various types of loans. One of the most popular programs the SBA offers is the SBA Express loans program, meant for business owners that need access to capital faster than a normal loan can provide. This includes working capital for those who are starting a business. Some uses for this include working capital for those who are starting a business. Those who wish to refinance existing debts may also get loans. Businesses with international transactions can also get export-assistance loans. Disaster recovery loans are also given to business owners who need to repair damaged property and machinery. Determine the type of loan to get based on your needs as a business owner. Find out which one can help propel you to success or at least help you move forward.
A few downsides
Although SBA loans seem really great for helping you get the kind of loan you need, they still have a few downsides. To begin with, your credit scores are required for the application. If you have a bad credit score, you may not be eligible. Your business must be at least two years old so that you can qualify. The loans are also very specific. You need to use the money for a specific purpose or else you won’t qualify. During application, you need to satisfy several criteria before your application is approved. However, when compared with traditional banks, their criteria are still way easier to achieve.
Applying for SBA loans
In order to apply, you need to visit the SBA website and fill out the application forms. You should provide documents as required by the SBA and information to verify your personal identity. You will also be required to submit documentation regarding the legality of your business along with the history of the business. Credit scores are also attached. Other documents required are proof of business ownership, business financials, profit and loss statements, tax returns for the business, your personal tax returns, and history of previous loan applications.
If you are uncertain about the information you find online, you can also visit a local SBA office found in your district to find out more about the approved lenders. Sometimes, even if you have satisfied the SBA guidelines, you still need to satisfy the eligibility criteria of the lending institution. It helps that you also understand these guidelines and follow them along with the requirements of the SBA. This could help you in swifter loan application processing.
In order to get approval, you might have to wait for quite some time. It takes several weeks, as they have to review all the documents submitted. There have been efforts made to speed up the process though. They also have the right to require you to submit additional documents if the ones you have submitted were not enough or were incomplete. After a thorough review, if you are not able to satisfy the requirements, they have the right to reject your application.
Given the fact that getting SBA loans is quite difficult, you might start looking for other options. Online loans are a possibility. There are a lot of financing institutions that are willing to provide loans and the application process is also very simple. They can even offer better repayment schemes and lower interest rates. The only downside is that you really cannot get any assurance that the transaction would be legitimate in the first place.
Make the right choice
Ultimately, you will decide which is best for you. Make sure that you weigh up the options well and understand the process. You should also think about if you are moving your business in the right direction with this loan. Sometimes, you think that you need a loan when in fact you don’t. You should also have a certain projection about your business moving forward so you will know if you can afford to repay the loan based on the terms and conditions provided. Otherwise, you will just bring your business down.
Established financial institutions and the SBA have dealt with many business owners before. They know exactly what to do if you are unable to pay the loan. They could take legal action, and this would hurt your business’ reputation even more. Your credit scores will also be affected, and this will also make you less capable of getting loans the next time when you need them.
For now, take a closer look at other reviews about SBA loans and how they help business owners. Learn from them so that you won’t have any problem as you start your own loan application.