You want to grow your business, but you want to do it in the right way. Understanding the pros and cons of SBA loans vs. conventional bank loans helps small business owners decide what is best for them.
Our team at Business Funding Group LLC (BFG) has more than 125 collective years of experience in helping businesses get the financing they need. Because we have been doing this for such a long time, you could get your loan faster than with competitors—while knowing that your loan has the best terms possible.
Deciding on financing is not trivial. The terms of a loan and the type of loan you pursue could have a great impact on your long-term outcomes, so it is best to understand your options before you decide.
SBA Loans Are a Powerful Choice for Small Businesses
Small Business Administration (SBA) loans are so powerful for small businesses in America because they are backed by the government. This reduces the risk for lenders, which leads to advantageous loan terms and more accessibility.
Both the SBA 7(a) and 504 loan programs offer beneficial financing options to small businesses.
SBA 7(a) Loan
The SBA 7(a) loan provides up to $5M in funding, with a repayment period between 10 and 25 years. We could usually get you no down payment on these loans and may even be able to get additional working capital, not just the purchase price.
The SBA 7(a) loan can be used for any legitimate business expense, including:
Please call us if you have any questions about SBA 7(a) loans and how they compare to conventional bank loans.
SBA 504 Loan
The SBA 504 loan program is closer to conventional bank loans than the 7(a) program. This program can be ideal for business owners who want to purchase real estate or equipment.
Business owners could secure financing through the 504 loan in amounts reaching the tens of millions. Repayment periods can be up to 30 years, which could mean a manageable monthly payment that allows you to use cash flow for other things.
Not everyone who applies for an SBA loan will be approved. To qualify, you will need to meet several eligibility standards. Most importantly, you need to have good credit and the ability to repay the loan. Your business must also be for-profit, be based in the U.S., and meet SBA’s size requirements.
We are happy to help you understand these rules—just call us to see if your business is eligible!
Conventional Loans Overview
Conventional bank loans are those offered directly by banks or credit unions. There is no backing by the government, so all risk lies with the lender. This can mean the lenders are more cautious when approving loans.
Often, conventional bank loans require higher down payments compared to SBA loans. Lenders may also have more requirements that business owners must meet (such as a minimum annual revenue or years of business experience).
A conventional loan may be a good option if you need funding fast, have great credit, or want shorter repayment periods and do not mind higher monthly payments.
Seek an Expert Opinion on Whether SBA Loans or Conventional Bank Loans Are Right for You
There is a lot to consider when deciding on what type of loan to pursue for your small business. We could help you figure out what you need and explain the benefits of SBA loans vs. conventional bank loans.
Contact us for a 15-minute, no-obligation call to discuss any questions you may have. You can also get started easily by filling out our fast and simple application. It only takes five minutes, does not impact your credit score, and helps you start funding your business growth.
We want to know which type of financing you are looking for, how much you want to borrow, and a bit about you. At BFG, we are experts in SBA financing and look forward to helping you fund your small business expansion!
(917) 593-5013