SBA Loans
Payment Types
& Requirements
Overview of SBA Loans
Are you a small business owner who's frustrated with getting financing for your company?
Well, we can’t blame you. Securing funding can be difficult for small business owners because you have the deck stacked against you. Banks usually favor bigger ventures with plenty of assets and excellent financial history.
Entrepreneurs don’t always have this luxury. That’s why the Small Business Administration introduced SBA loans. It levels the playing field for owners to have a chance at business success. In this article, we’ll discuss SBA loans, what the requirements are, and what you can use them for.
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What is an SBA Loan?
SBA loans are financial assistance that’s offered and guaranteed by the U.S. Small Business Administration (SBA). It's aimed at giving loans to small and medium-sized businesses, who don't have access to significant capital usually offered by banks.
A common misconception is that the SBA is the one who issues the small loans to businesses—that's not entirely accurate. Instead, it partners with other lenders and institutions who give the loan. The SBA simply co-signs and guarantees the loan for qualified entrepreneurs. They, however, guarantee a big chunk of that loan—up to 90% of the total amount.
Small business administration loans are fantastic if you don’t have the collateral or long credit history that big banks usually require. It gives entrepreneurs like you a fighting chance to make your business succeed. Small business loans are your lifeline to help your business, especially during difficult times.
What Can The Loan Be Used For?
SBA loans give entrepreneurs access to funding that they can use to jumpstart their small businesses. It acts as a security loan that allows them to fund daily operations during lean months or have a line of credit in case of emergencies.
Business owners can also use SBA loans to take advantage of market conditions. Funds can be used to buy more inventory in anticipation of peak seasons like Christmas or Thanksgiving.But probably the best use of the loan is to fund business expansion by investing in equipment and assets.
SBA loans are a fantastic last resort solution for business owners, but they’re by no means your only option. L3 Funding has a number of merchant funding alternatives with easy approval and payment terms. Schedule a free one-on-one consultation with us today and see if you qualify for any of our loan products.
Benefits of an SBA Loan
SBA loans give small businesses access to capital that they can't typically get a hold of due to strict bank requirements.
Despite this, SBA loans give competitive rates that are comparable to a non-guaranteed loan. You get loan amounts without the need to have any collateral in most instances. It’s the best of both worlds!
SBA loan payment terms are also very flexible and affordable. The goal is to not put a strain on the already demanding overhead most small business owners experience.
And to increase your chances of success, SBA also provides continuing education and counseling for entrepreneurs.
How to Apply for an SBA Loan
There’s a misconception that it’s tough to apply for SBA loans. However, you increase your chances of success by knowing the SBA loan requirements.
First, your venture needs to be at the right size to be considered a small business. On average, your company cannot exceed 500 employees, although that number changes depending on the industry.
Next, you must have already applied for private financing—and got turned down. This shows the SBA you have no other options to finance your business.
Lastly, you need to apply to an SBA-approved lender and pass their requirements.
To increase your chances of success, you must prepare an SBA loan package to prove your highly qualified. It includes all relevant information like your credit history, business plan, and sales projections.
Different Types of SBA Loans
There are several types of SBA loans, each with a purpose tied to them. Certain loan types only allow you to use it in specific situations, so you need to do your research beforehand.
The 7(a) Loan Program is the flagship SBA loan. It's the most flexible type that can be used in a wide variety of situations. Businesses can borrow up to $2 million, with a maturity period of 10 years for working capital and 25 years for fixed assets.
Within the 7(a) Loan Program, there are also subcategories for specific situations. The Express Program, for instance, is for business owners who need funding within 36 hours. Another one is the Rural Lender Advantage Program, which is for businesses in disadvantaged rural communities.
Another type of SBA loan is the CDC/504 Loan Program. This is for the specific purpose of acquiring assets for business expansion. For small, short term financing, the Microloan Program offers quick loans of up to $35,000.
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"Our distributors were charging us premiums because we didn't have the money to pay for our inventory in advance. L3 arranged a merchant cash advance within days and we were able to capitalize on huge discounts available to much larger businesses. We've never looked back since and consider L3 a long tern partner."
Chad, Spokane, WA
$155,000
Total Funding Deposited
4 hours
Time to funding
"Our oven stopped working right before our busy tourist season and our bank denied our loan request. L3 Funding was able to get us the cash we needed in a couple of days and we were back in business in time to handle the rush of customers. L3 has been an awesome partner and they really provide peace of mind."
Alex, Myrtle Beach, SC
$75,000
Total Funding Deposited
24 hours
Time to funding
"We were rapidly scaling but our customers would take too long to pay our invoices. We had to choose between growth or stability. Our bank wouldn't even consider our special circumstances and denied our credit line outright. The financing with L3 Funding opened up our cash flow and helped us expand a lot faster than we ever could alone."
Justin, Austin, TX
$48,000
Total Funding Deposited
48 hours
Time to funding
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