How SBA Loans Work

How SBA Loans Work

What is an SBA loan?

An SBA loan is a loan made by a bank that is guaranteed by the US government. If all rules are followed, the US government will give the bank a guarantee of 75% to 90%. This means that if you don’t repay the loan, the government will reimburse the bank. This incentivizes banks to work with small and younger businesses, especially in business areas like e-commerce and technology. This incentivizes banks to work with small businesses and younger businesses, especially in business areas such as e-commerce and technology.

What are the different types of SBA loans available?

There are two major programs: SBA 7a and 504. The 7a program covers working capital and real estate, with a cap of $5 million. The 504 program covers only real estate and improvements to that real estate.

What are the benefits of obtaining an SBA loan?

There are many benefits to an SBA loan versus a conventional loan. We need to analyze your business to tell you what the benefits of an SBA loan are to you.

What are the typical terms and conditions of SBA loans?

All loans will have many terms and conditions, but the fundamental essence of an SBA loan is that if you make your monthly payments, the loan will not be canceled. We can better understand what a loan would look like for your company by examining your financials – both business and personal. For SBA, the typical terms are either a 10- or 25-year repayment period, with floating interest rates based on prime. There are many rules and regulations governing all loans, especially SBA loans. It’s our job to help you understand how to use SBA loans and what the requirements are.

How can an SBA loan be used?

SBA loans can be used for any legitimate business purpose to build your business. Hiring new personnel, funding inventory, and buying equipment are all examples of things you can use an SBA loan for.

What are the interest rates and repayment terms for SBA loans?

Repayment for most working capital loans is typically ten years, while loans that involve the purchase of real estate can have terms as long as 30 years. The interest rate for an SBA loan is 2.25% to 2.75% above prime. This is a variable rate that is reset every 90 days. If prime rates increase, your loan rate will also increase. If interest rates decrease, your interest rate will go down as well.

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