3 Benefits Of Using SBA Business Loans

Posted on: 3 February 2023

If you run a small business and want extra cash to expand, then you might be looking at your lending options. While regular loans work well for some business owners, you should also look at SBA options. Why?

1. Lower Interest Rates 

Small businesses don't always have a lot of ready cash. You might struggle to pay down a regular loan with high interest rates even though it gives you the financing you need to grow your company.

SBA loans typically have lower interest rates. These products have the backing of the U.S. Small Business Administration (SBA). They exert more control over the rates a lender can charge for your borrowing.

So, an SBA loan will link to a standard base rate. The lender then adds a percentage to this rate. This combined rate is the interest you will pay. The SBA typically sets maximum rates on these products so that lenders can't charge too much. So, the interest you pay on your loan should be lower and more affordable.

2. Improved Eligibility

As a small business owner, you might not have built up a good enough financial track record to get approval for some regular business loans. If your business is in the process of finding its financial footing, then a lender might view you as a risk.

So, they might not approve your application. Or, they might increase your interest rates to mitigate against the risk of default.

SBA loans solely support small businesses. The money you borrow has the backing of the SBA. If you default, then the SBA commits to paying back most of the loan to your lender.

This backing makes you a lower risk. Lenders are more likely to accept your application as long as you meet core SBA eligibility criteria. You improve your chances of getting the finance you need.

3. More Lending Options

Some small businesses find it hard to borrow larger sums of money. Lenders sometimes cap loans they give to companies who are new to the market or who don't have high turnovers.

SBA loans give you more options, The system includes various levels of loans. So, you can apply for a small loan for a small project or one for millions of dollars to buy fixed assets.

SBA loans can take time to set up. You'll get faster results if you use a preferred provider. To find out more, contact business loan services.