The government agency called Small Business Administration offers different types of business loans of various requirements. Small business owners can always turn to this for start-up expenses, including costs in expanding their business or additional cash flow to run their business more smoothly. The SBA connects the borrower to their lending partners instead of issuing the funds.
When should you use the SBA?
- Your credit score is good, and you can put up some collateral but could not qualify for a bank loan – Its programs are for small business owners who could not secure financing through typical bank application. Lenders from the private sector provide the loans, which are guaranteed by the SBA. Because of that, it is easier to meet the financial criteria. Borrowers have better chances of getting their applications approved than if they apply to the bank on their own.
- You are looking for a lower interest rate, and you can wait for about 90 days to process your loan – Getting the approval takes time because the government backs the loan.
When should you not use the SBA?
- You lack time – If you need the funds as quickly as possible, the SBA loan would not be the best choice for you. Like most government agencies, the application process in the SBA loan takes longer than in the banks.
- Your credit score is not that stellar, and you need some improvement on your resume – The SBA looks at the borrowers’ credit score, skills, and ability to manage the business. It scrutinizes these details as they decide and process the loan.
If you think that the SBA loan is not the best choice for you, you can always go to the bank or other financial institutions like credit unions and other alternative lenders. What is important is that you have a complete understanding of the products that are available to you.
