3 Things To Know About SBA Loans

The SBA is the United States Small Business Administration, which is a federal agency. The purpose of the SBA is to help individuals begin and grow their small businesses. One of the ways they do this is through SBA loans. There are a few key things to know about these loans. 

1. They Can Be Hard To Get

SBA loans can be hard to get because they are a favorable type of loan. If your small business receives an SBA loan, the SBA will guarantee that they will pay back your lender a certain percentage of the loan if you are unable to do so yourself. If your business is struggling and cannot make its loan payments it does not have to be closed down if you have an SBA loan.

2. They Guarantee Different Amounts

An SBA loan does not provide a standard guarantee to all small businesses. The guarantees vary depending on the size of the loan that you take out. For example, if you receive an SBA loan for any amount less than $150,000, the SBA will guarantee 85% of that. This means that if you take out a loan for $100,000, but are unable to pay back all of it, the SBA will pay back $85,000 in your name to your lender. If your loan is greater than $150,000, the SBA will guarantee 75% of it. 

3. They Have Noted Restrictions

It is not possible for any business to apply for an SBA loan and get it. There are a number of restrictions related to SBA loan qualifications. One of the main necessities is that your small business must do business in the United States if you are getting an SBA loan. This kind of loan cannot be the first type of loan your business tries to get; you must use some of your other assets, including personal ones, to try to financially support your business before the SBA will step in to help.

You also cannot already be delinquent on loans that the government has previously lent to you. Your business cannot be a nonprofit and has to be defined as a small business per SBA guidelines. If you are applying for an SBA loan, you have to have an indicated reason why you would like to receive the loan, such as getting a specific piece of equipment for your business. 

Though SBA loans can be competitive, they are worth trying to get as they can support your small business and help it weather through tough times.