Physical Address
304 North Cardinal St.
Dorchester Center, MA 02124
Physical Address
304 North Cardinal St.
Dorchester Center, MA 02124
“`html
Need money to start or expand your small business? Loans guaranteed by the U.S. Small Business Administration (SBA) can be the perfect solution for some business owners, but SBA loans aren’t right for everyone. Here are the pros and cons of SBA loans.
SBA guaranteed loans have several advantages to consider.
SBA loans don’t come from the SBA, but from approved lenders the SBA partners with. The SBA guarantees 50% to 85% of the loan amount, reducing the lender’s risk. This can make it easier to qualify for a loan even if other lenders have turned you down.
SBA loans are available for a wide range of purposes, including:
Whether you need a little bit of money or a lot, the SBA has a loan program to suit. The SBA’s primary small business loan programs—7(a), 504, and microloans—offer financing ranging from $500 to $5.5 million, depending on the loan you choose.
SBA loans may have fixed or variable interest rates. The SBA caps the interest rate approved lenders can charge, pegged to the prime rate or an optional peg rate. The interest rate for variable-rate SBA loans may rise or fall with this base rate. As of May 2024, the maximum fixed interest rates for SBA loans ranged from 13.50% to 16.50%, depending on loan amount.
Repaying short-term business loans in six, 12, or 24 months can be challenging. SBA loans give you more time to pay back your loan. SBA microloan terms can be up to six years. SBA 504 and 7(a) loan repayment terms generally range from 10 to 25 years.
In addition to their benefits, SBA loans have a few downsides to be aware of.
Gathering the documentation for SBA loan applications can be time-consuming. In addition to completing multiple SBA forms, you may need to provide a business plan, personal and business bank statements and tax returns, cash flow projections, business financial statements, legal documents such as your business license, and more.
Typically, getting approval for an SBA loan takes 60 to 90 days. Receiving funding may take a few weeks—or months—longer. In a hurry? SBA express 7(a) loans can be approved and funded much more quickly and require less documentation but are limited to $500,000. You can also speed things up by working with SBA preferred lenders, who can approve loans faster than standard SBA lenders.
Banks evaluate both your business and personal credit scores when you apply for an SBA loan. In general, you need a personal FICO® Score of at least 640 to qualify; scores of 700 and higher are preferable. (SBA microloans are the exception: You may qualify even if your credit is only fair.)
To get an SBA loan, you must generally be based in the U.S. or its territories, run a for-profit business, demonstrate good business credit, and have been turned down by other lenders. You’ll also need to meet SBA size standards for your industry, based on your annual receipts or number of employees. Lenders may have their own eligibility standards on top of SBA requirements.
Most SBA loans require putting up collateral, which can include your personal real estate. In addition, anyone with 20% ownership or more in the business is typically expected to personally guarantee the loan. Should you default, the SBA pays the lender the guaranteed amount, but you’re responsible for the balance. Fail to pay, and the federal government could garnish your tax refund and federal benefits, such as Social Security.
Whether or not you should get an SBA loan depends on how quickly you need money, whether you fit the SBA’s criteria, and whether you’ve been denied other financing.
SBA loans can be a good option if:
An SBA loan may not be the best fit if:
Still unsure? SBA district offices and SBA resource partners nationwide can advise you on finding the right business loan.
An SBA loan isn’t your only financing option. Here are some alternatives.
A business credit card can finance smaller purchases. If the card issuer reports your account to business credit bureaus, timely payments could help your business build a credit history too.
Business lines of credit are generally revolving credit. Borrow up to your credit limit, paying interest only on what you borrow. Once you repay the borrowed funds, you can borrow against the credit line again.
Business loans from online lenders generally top out at $250,000 or so and are repaid over six to 24 months via daily or weekly transfers from your business bank account. Online lenders typically have less stringent requirements, streamlined application processes, and faster loan approvals. You’ll need to meet the lender’s minimum requirements for time in business, annual revenues, and personal FICO® Scores, but may qualify with a FICO® Score as low as 500.
Use business crowdfunding sites such as Fundable, Indiegogo, and WeFunder to raise money for a startup or new product. Some sites gather loans from individual investors; others collect donations you repay by giving donors early access to your product.
Like car loans, equipment loans use the equipment you purchase as collateral, so you don’t need collateral of your own. Specialized equipment financing companies and equipment manufacturers are good sources of equipment loans.
Need financing for inventory or materials? See if vendors will extend trade credit, which could give you 30, 60, or 90 days to pay. If vendors report your account to business credit bureaus, timely payments could help build a business credit history.
If you invoice clients and need money quickly, consider selling unpaid accounts receivable to a factoring company for an upfront percentage of the invoice. The factor collects the rest and pays you, minus fees and interest (which can be costly).
Businesses that take credit and debit cards and meet revenue criteria can receive cash advances against future card revenues from merchant cash advance companies. This is generally a high-interest option requiring daily or weekly payments.
When applying for any business loan, start by checking your business credit report and personal credit score. If your scores aren’t up to lenders’ standards, paying down debt and making timely payments can help increase them. Sign up for Experian’s business credit monitoring service and you’ll receive alerts on your progress, so you can spend more time focusing on your business.
For any mortgage service needs, call O1ne Mortgage at 213-732-3074. We are here to help you with the best mortgage solutions tailored to your needs.
“`