Small business Loan: 5 SBA loans with low interest

The SBA (Small Business Administration) is an autonomous U.S. government agency providing small business loans with a low interest rate. Its main function is to provide financial aid in terms of loans to small businesses. It mainly provides a small business loan that has a low interest rate and terms are flexible. The SBA helps to know small business owners’ government plans, contracts, and opportunities. Loans are available through certain nonprofit, community-based organizations that are experienced in lending and business management assistance.

When you have a startup you are not likely to get a loan because you are seen as a risky investment even you have a game-changer startup plan. But SBA helps small businesses grow or at least help them float above the water. They help them so because they have low-interest rate and their lending terms are flexible for small owners.

Small business loan: Types and explanations

SBA provides five types of small business loan having startup:

1.Micro Loans for small business:

SBA microloan is the first resource for startups that needs smaller loans. This loan can be used to purchase material, furniture, supplies, and working capital. However, SBA microloan can’t be used to pay off existing debt or to purchase real estate.

SBA Microloan provides small business loans up to $50,000. But the average Micro Loan is about $13,000. SBA provides a low-interest rate between 8% to 13%. The return times for microloan are a maximum of 6 years, it depends on the lender. SBA microloan process takes at least 2-3 weeks.

2.Standard 7(a) Loan:

SBA 7(a) Loan program is the most popular choice for most startups and small businesses due to the various different facilities it offers. It offers a higher amount and borrowers have more flexibility in how they can use the fund. This loan can be used for Refinancing existing business debt, under certain conditions, Long and short-term working capital, purchase of the real estate, including land and buildings, or purchase of equipment, machinery, furniture, etc.

SBA standard 7(a) Loan Program provides small business loans up to $5 million. SBA can guaranty up to; 85% loan up to $150,000 and 75% loan greater than $150,000. For real estate, the maximum time is 25 years. For others’ repayment time is 10 years.

SBA 7(a) Loan process takes from 1 month to 3 months. So if you are in need of fast cash you want to try other options.

3.SBA community Advantage Loan:

When some business does not meet the eligibility criteria for SBA standard 7(a) Loan program they should consider applying for SBA community Advantage Loan program. It is a pilot project within 7(a) loans.

This program helps small businesses who are underserved or low-income area access. These businesses have been working less than 3 years and thus they don’t qualify for SBA 7(a) program. This program is very similar to the SBA standard 7(a) Loan program but has slightly different eligibility criteria and lending process.

Guidelines to use the fund is the same as of SBA standard 7(a) Loan program. It helps startup businesses. SBA Community Advantage Loan program does not require collateral (Collateral is valuable property owned by someone who wants to borrow money, that they agree will become the property of the company or person who lends the money if the debt is not paid back) for a loan up to $250,000. For loans above $250,000, they have SBA guidelines for collateral. SBA Community Advantage Loan program requires a personal guarantee.

Maximum loan can be received up to $250,000. Loan SBA community Advantage Loan process takes from 1 month to 3 months or more depending on lenders.

4.SBA Express Loan:

SBA Express Loan is similar to SBA 7(a) loan program. But it has a great advantage that if you apply for SBA Express Loan, approval is guaranteed within 36 hours if you are eligible.

The use of SBA Express Loan is similar to SBA 7(a) loan program. This fund can be used for purchasing real estate, machinery, or expansion and renovation. SBA Express Loan can be used to refinance debt but there are some conditions such as that your lenders are equally secure and you have a solid reason to pay off the debt.

SBA Express Loan is only 50% guaranteed by SBA. But because it is has a lower guaranty it may have slightly higher rates but they can’t be higher than SBA guidelines.

5.SBA CDC or 504 Loan:

SBA CDC/504 Loan program is used for small business owners who want to make a fixed commercial asset purchase to expand their business. SBA 504 Loan program is a partnership program between CDC (Certified Development Company) and a lender.

Qualified lender working with CDC can provide up to 90% contribution for purchasing commercial property and new construction. Here CDC provides up to 40% and lenders provide up to 50% of the finance and the borrower has to pay at least 10% of the finance. It can provide refinancing for debt related to purchasing fixed assets in certain conditions.

It provides loan from $125,000 up to $5,000,000. It has a low-interest rate SBA CDC/504 Loan process takes from 1 month to 3 months. For SBA CDC/504 Loan 10-20-25 years.

Eligibility for a small business loan:

Eligibility for SBA loans for small businesses is based on credit score mostly and a solid business plan. If you have a low credit score then it will difficult to obtain an SBA loan. To obtain a loan when you have a low credit score you need to show strength in different fields. Such as, is your business generating good revenue? Or can someone co-sign the loan with you? If these are possible then you can make up for your bad credit score and get a loan to expand your business to great heights.

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