Accessing finance is one of the major concerns of the owners of the small business as they struggle to obtain capital to finance their businesses. It is often the case that traditional sources of funding are not suitable for small businesses, but that’s where SBA loans come in. These include government guaranteed loans whose terms of funding and eligibility are reasonably affordable and flexible respectively.
At Union State Bank, we want our small business owners to have the SBA loan options that help them achieve their vision. In this article, you will learn about the major advantages of SBA loans and why your business needs them to succeed.
What Are SBA Loans?
SBA loans are intended for providing the credit to small business entities that are not capable of receiving the traditional credit. Although these loans are offered by the various participating lenders for instance Union State Bank, the SBA will guarantee a part of the loan, which makes the risk of lending to be less.
Key Types of SBA Loans:
7(a) Loan Program:
The most popular type of the SBA loan that may be used for working capital, equipment purchase, or to acquire real estate.
504 Loan Program:
In particular to acquire fixed assets such as land and buildings, machinery and equipment and the like.
Microloans:
Micro-financing or loans of $50, 000 or less for start-ups or for small business ideas.
Every kind of loan is designed to meet various business requirements to make sure that there is always a solution for every businessman.
- Lower Down Payments
Perhaps the most compelling advantage of SBA loans is the fact that down payment is relatively small compared to the usual loans. This is especially useful for companies with little capital to invest in the business and or purchasing inventory.
For instance, SBA 7(a) loans entail a down payment of only 10% of the loan amount which makes it easier for businesses that wish to retain working capital.
- Longer Repayment Terms
SBA loans are also characterized by longer periods of repayment as compared to conventional loans which in turn have the effect of less monthly payments and therefore better cash flows.
Repayment Terms by Loan Type:
7(a) Loans:
For real estate, up to 25 years, for equipment 10 years, and for working capital 7 years.
504 Loans:
Real estate up to 25 years and equipment up to 10 years.
It also means that the small business owners can plan for growth and development of their businesses without worrying about the high monthly premiums.
- Competitive Interest Rates
The SBA loans are normally cheaper than other forms of financing because the government takes part in guaranteeing them. These competitive rates make borrowing more affordable, meaning that the cost of that loan is brought down.
Here at Union State Bank our loan rates are set in compliance with the federal regulations as provided by SBA, thus offering you affordable financing.
- Flexible Use of Funds
In terms of purpose, SBA loans are flexible to an incredible degree as to how the money may be utilised. Depending on the loan type, you can allocate the funds for:
- Buying or building properties.
- Purchasing a machine or stocks or any other raw material needed for production.
- Refinancing existing debt.
- Met for working capital requirements.
It also gives small businesses the advantage of being able to deal with their particular needs and goals concerning their finances without the rigid structure.
- Easier Qualification
Conventional loans are regularly characterized by a very strict credit profile that demands high credit scores and high levels of security. SBA loans, on the other hand, are specifically meant for small business organizations that would not qualify for such loans under the above-laid down criteria.
- Eligibility Factors for SBA Loans:
- Functions as a commercial venture.
- To qualify for an SBA loan, you must meet the SBA’s size standards.
- Ability to repay the loan has to be shown.
- Be established and run in the United States.
That is why SBA loans are suitable for startup owners and beginners as even with low credit scores you may qualify for it.
- Access to Expert Guidance
When you apply for an SBA loan, you gain access to more than just funding. The SBA provides resources, counseling, and training to help you succeed.
At Union State Bank, our experienced loan officers are also available to guide you through the application process, ensuring you understand your options and make informed decisions.
- Opportunities for Business Growth
Whether you’re launching a new product, expanding your operations, or entering new markets, SBA loans can provide the capital needed to take your business to the next level.
For example, if you’re looking to open a second location, a 7(a) loan can help you finance the property, hire staff, and purchase inventory. This growth potential is a significant advantage for businesses ready to scale.
- Encouragement During Economic Hardship
SBA loans may also be useful in such situations as during the recession period or in any other calamities. The PPP introduced during the COVID-19 pandemic is an example of how the SBA assists small business during the period of crises.
Outside of special programs SBA loans can go a long way in helping businesses overcome short-term hiccups through affordable funding.
How to Apply for an SBA Loan
There are some procedures that need to be followed when applying for an SBA loan, but at Union State Bank we will ensure you complete the process with ease.
Steps to Apply:
- Assess Your Financial Needs:
Find out the amount of money required for your project and the purpose for this money.
- Prepare Documentation:
Obtain financial statements, tax returns, a business plan and other documents that may be needed.
- Contact Union State Bank:
Our team will help you to complete the application and to decide on the type of loan that would be suitable for you.
- Submit Your Application:
We will collaborate with the SBA to get your application through and obtain approval.
Real-Life Success Stories
Over the years, SBA loans have made the dreams of many small business owners become a reality and at Union State Bank, we have been privileged to make that happen. Used ranging from opening new outlets to purchase of modern equipment, these loans have acted as a booster to success.
To find out how other people benefited, visit the SBA success stories page if you are interested.
Bottom Line
SBA loans have several advantages for small business such as lower interest rates and longer terms, flexible use of the funds and qualifiable conditions. Whether you are new to business or seeking to grow, SBA loans are the tools that will help you get where you want.At Union State Bank, we’re proud to partner with small businesses and help them thrive. Visit our SBA Loans page or contact us today to learn more about how we can assist you in securing the funding you need. Together, we can turn your business ambitions into reality.