What Are SBA Loans?
Defining SBA Loans
An SBA loan, contrary to what the name might suggest, is not a loan from the SBA directly. Rather, what you get with an SBA loan is a more traditional loan but one that is partially backed by the government. For instance, let’s say you go to a bank to get a 50,000 loan. If it is an SBA loan, up to perhaps 40,000 of that may be guaranteed by the SBA. Meaning, if you don’t pay or for some reason end up defaulting, then the financial institution will have recourse regarding recovering their losses from the SBA.
When it comes to loans for a smaller business, lenders are often hard-pressed to qualify the borrower in question. Whether the company is relatively new, does not have enough revenue, or for any number of reasons, they don’t make the best candidates when it comes to business loans. Enter, the SBA. Their guarantee helps make funding a possibility for more small business owners.
7(a) loans tend to be the most common within the SBA family of loans. With access to up to $5 million in working capital for a term of 25 years, numerous industries find that these types of loans are undoubtedly adequate for their needs. Interest rates tend to be between 7-8% depending on trade and the nature of your business. Most who go for an SBA loan will fall under this 7(a) category.
Express SBA Loans can range from $20,000 to $350,000 for up to 10 years with an average interest rate of 7.5% APR.
These types of loans are extremely specific. For example, if you are looking to purchase commercial real estate or perhaps a large piece of equipment, then this might be the program you fall under. The borrower may need to provide up to 20% of the total value, with the SBA kicking in 40% and the lender the rest. The cap on this type of loan is generally $5 million.
An SBA Express loan is for funding up to 350k. These are suitable for small businesses and newer companies. SBA Express loans are funded in as little as two weeks. The funds can be used for working capital, inventory, to supplies. It cannot, however, be used to purchase real estate.
At First Union Lending, we make the process super simple and fast. If you pass our initial qualifications, there is a 90% chance of completing the process and having the loan fund.
Want to find out if you qualify for an SBA Loan? Give us a call or fill out the form below.