What You Need to Know About SBA Loans

Small businesses looking into loan options often find that SBA loans are their best fit, but they might not realize all the ways that these loans can benefit them. That’s because most of the focus is on the 7a program, which is designed to help small businesses access traditional business loans with advantageous terms. These are the loans that most entrepreneurs are familiar with, and they have a great set of parameters designed to encourage the development of new businesses. There’s more, though.

If you’re looking for loans to help an existing company modernize operations so they can remain competitive into the future, then you’ll want to check out the options in the 504 program. This program was specifically built to help companies update without an unmanageable burden. That’s why the loans in this program typically only require 10 percent equity. Other SBA loans include the 7m microloan program for amounts under $35,000.

Prequalification for Loans

The Small Business Administration recently began a prequalification program. Borrowers looking for loans under $250,000 can apply to the SBA for prequalification before talking to a lender. This allows them to receive a loan more quickly once a lender is found, because that borrower has already proven to the Administration that the loan will work.

Preferred Lenders

The other way to speed up the loan approval process is by working with preferred lenders. Preferred lenders have the ability to approve SBA loans on their own, without having to wait for approval by the administration itself. This makes it easier for them to qualify loans more efficiently. It also gives borrowers the option to approach multiple lenders at once. When using regular SBA lenders, parallel applications can not typically be processed.

Moving Forward With Your Loan Application

When you are ready to move forward, it’s important to understand what you’ll need to complete a successful loan application. The SBA will require your application include not only your company’s financial disclosures, including income and current debt overhead. It will also require you to prove that your business helps the economic health of the community it operates in. This is typically shown by demonstrating that the business adds net jobs to the community directly. Added employment through the company’s supply chain does not count, though it might be viewed as a bonus.

Your loan package will also need to include a business plan, especially if you’re just starting up. That way, the lender and the administration will be able to see what your SBA loans will allow you to achieve.

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