What You need to Know about SBA Loans

There are some things you should know about SBA loans if you are going to apply now or in the near future. The Small Business Administration provides a number of resources to entrepreneurs, newly formed companies, and even established businesses. One such resource are SBA loans, which generally provide small capital amounts for critical needs.
What You need to Know about SBA Loans
Created in July 1953, the Small Business Administration is a government supported entity which promotes independent commerce through business development, access to capital, and additional functions.
But, surprisingly, the Small Business Administration does not actually loan money. Instead, it serves as a type of partial-repayment cosigner, which is why collateral is typically needed to acquire a SBA loan. Here are some more things you need to know about SBA loans:
The SBA imposes interest rate limits. Since the Small Business Administration is a government agency, it is empowered with the right to restrict interest rate charges. In 2016, the maximum fixed rate ranges from 3.5 percent to 4.75 percent. While the allowable variable rate is approximately 8.25 percent.
There are multiple SBA loan programs. Because the agency’s mission is to help small business, it offers a number of loan programs. Loan amount range from $5,000 to $5 million, to meet the needs of many different businesses.
SBA loans are used for different purposes. While most people associate a business loan with start-up capital, SBA loans serve more purposes. For instance, funds can be used to refinance expensive debt, purchase equipment and/or inventory, expansion, or even to buy real estate.
Repayment terms are the longest with SBA loans. Unlike many other types of traditional business loans, SBA loans have long repayment terms of 5 to 25 years. In addition, the SBA also offers revolving credit lines. Of course, the loan terms depend on the loan type, as well as the applicant’s credit and other factors.
Less than perfect credit is okay but good credit is better. Another aspect that sets SBA loans apart from traditional lender debt instruments is less than perfect credit is okay. However, understand that poor or even mediocre credit applicants will have fewer choices and less access, though this does not mean no access.
Another positive is SBA loans are ideal for minorities and also help with disaster relief when necessary. Last but not least, extensive documentation is part of the SBA loan process, so expect to provide a lot of financial statements. Understand the application process will take time because two entities (the lender and SBA, will go over the documentation.) For help with Texas SBA Loans please contact us.

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