What is an SBA Loan? How Does it Differ from Standard Small Business Loans?

In many cases applying for a loan is critical for the establishment and success of your small business. Most banks or credit unions have a variety of small business loans, but one type that’s worth looking into is an SBA loan. What exactly is an SBA loan and how is it similar to a standard small business loan?

Small Business Loan Basics

• Each lender has different qualifications and requirements, be sure to know if you meet the criteria before applying
• Have the necessary financial and legal documents prepared
• Develop a business plan; lenders will feel more comfortable granting you the loan if you have a better handle on your finances and know how to budget.
• Loans often require collateral so be ready to provide one. Examples include real estate (buildings, homes, land), vehicles, inventory, and equipment.
• Be sure to look into any area grants or funding from local, county or state organizations prior to applying for a small business loan

How is an SBA Loan different?

SBA Loans are small business loans provided by lenders who are partners of the Small Business Administration. The SBA doesn’t lend the money directly but has guidelines set for loans made by partnering lenders: banks, credit unions, community development organizations, and other lending institutions.

By setting guidelines the SBA reduces risks for lenders and giving them easier access to gaining capital which makes it easier for small businesses to obtain these loans. A win-win for both the lender and the small business.

What are the benefits of an SBA loan?

The major benefits are competitive fees and rates, continual support with counseling and education opportunities, lower down payments, flexible requirements of what you can have for overhead, and in some cases, no collateral is needed.

Loan amounts can range from small to large and some programs may have restrictions on what these funds can be used for. Be sure to check with an SBA- approved lender who can match you with the best loan for your needs.

Ready to get started on your SBA loan? Contact Matt below.