Are you thinking about starting a small business? Have you heard about the Small Business Administration and the loan programs it offers? You might be wondering if an SBA loan is right for you or simply how SBA loans work. Here are answers to frequently asked questions about SBA loans
1. What is an SBA loan?
While the Small Business administration oversees a number of loan programs, the SBA does not lend money itself. When you apply for an SBA loan, you’ll work with a local bank to receive financing for your project and a portion of the loan is guaranteed by the SBA.
SBA Loan programs include:
- 7(a) Loan Program – The most common general small business loan offered by the SBA.
- Microloan Program – Small, short-term small business loans.
- Real Estate & Equipment Loans or CDC/504 Loan Program – Loans for real estate and equipment.
- Disaster Loans – Low interest loans to repair or replace items damaged in a disaster.
2. Should I apply for an SBA loan or traditional bank loan?
Which loan is right for your business depends on a number of factors. First, you’ll want to know which SBA loan programs you may or may not qualify for. In addition, you’ll want to compare the SBA loan programs versus a traditional commercial loan. While an SBA loan might not be a fit for every business, it may provide certain benefits over traditional loans, in certain situations, including:
- Longer terms
- Lower down payments
- Increased cash flow
- Flexible repayment options
As an SBA Preferred Lender, Merchants Bank has experience helping businesses choose between SBA and traditional commercial loans. Your local Merchants Bank Commercial Banker can guide you through our options to find the right loan program for you.
3. What information do I need to complete my loan application?
Educating yourself on the SBA loan processing and knowing what information you need for the application can save you a lot of time. Use these resources to prepare yourself when applying for an SBA loan:
- Your Merchants Bank Commercial Banker
- The SBA’s official loan application checklist
- A free online training offered by the SBA on how to prepare your loan package
For more information on SBA loans, talk to a Commercial Banker at your local Merchants Bank. We’re proud to be an SBA Preferred Lender.
Subject to credit approval. Equal Housing Lender.