When it comes to small business loans
, there is no shortage of information online. For example, it won’t take long to realise that there are a variety of lenders vying for your business.
If you want to learn more about small business loans, the SBA website
is one of the better places to start. It’s here that you will find information on everything from the many types of loans to the application process (and that is just the start).
Here are five things you should know before applying for an SBA small business loan:1. You can use the money for almost anything
Generally speaking, as long as it’s legal, you can use an SBA loan for almost any business purpose imaginable. This includes everything from buying equipment or inventory to working capital to refinancing debt.
As long as you have a plan on how you will use the funds, everything will come together once you have access to the money.2. Loan amounts vary
It’s not good enough to say that you want to apply for an SBA small business loan. You need to have a clear idea of how much money you require.
You don’t want to borrow more money than you need, as this can make it a challenge to pay back the loan (not to mention the fact that you will waste money on interest).
Conversely, you don’t want to borrow too little, as this means that you will find yourself searching for other forms of financing down the road.
Loan amounts vary from $5,000 on the low end to $5m on the high end, so make sure you know what you need.3. Loan terms vary
How long do you need to pay back your loan? This depends on many factors, including the amount you are borrowing and your annual revenue.
SBA loan terms vary from 5 to 25 years, meaning that you should be able to find something that fits into your business.
The benefit of a longer term is lower payments. Of course, a shorter term means you won’t have the payment weighing on your mind for an extended period of time.4. You will pay interest
With interest rates starting at right around 6.5%, SBA small business loans are competitive in this regard.
You need to understand upfront that you are going to pay interest on the money you borrow. There is no way around this, so you should get on board with the idea early on.
Your interest rate will vary based on a variety of factors, including your credit score, business history, and the lender.
Do your best to shop around for the lowest rate, as even one percentage point can save you thousands upon thousands of dollars.5. Financing is fast
You won’t be able to secure an SBA small business loan in a day or two, but the process doesn’t typically drag on for any longer than three to four weeks.
If you want to speed things up, make sure you have all the right information in hand as you begin the application process. This will ensure that you are able to provide the lender with exactly what they require, without delay.
There are many benefits of an SBA small business loan, such as:
- Competitive interest rate
- Low down payment
- Long payment terms
- Ability to use the money for many purposes
If these benefits pique your interest and you qualify for one of the many SBA loan programs, you shouldn’t hesitate to learn more. As you gain additional knowledge, it will be easier for you to decide what to do next.Do you have any experience applying for and using the funds from an SBA loan? What did you enjoy about the process? Did you make any mistakes that you would avoid in the future? Share your personal experiences and guidance in the comment section below. Your advice can help other business owners make better borrowing decisions.