You’ve crunched the numbers, you’ve run through the forecasts, and everyone on the team concurs: Business is growing and it’s time to take things up a level.
For entrepreneurs who need to invest in equipment, there are many kinds of loans out there. But there are options from the Small Business Administration(SBA) that can make it more affordable for a small business to grow without stifling cash flow.
How does an SBA loan work?
In spite of what it sounds like, the federal government doesn’t loan the money. Financing still comes from the bank, but a portion of the loan is backed by the federal government. The idea is to stimulate economic development, creating a win-win for the entrepreneur and the lender. Businesses that don’t have much collateral have a tool to help them grow, and at the same time, the lender assumes less risk.
Whether your business is ready to expand or its time to replace a broken machine, an SBA loan is a way to get funding and support, especially if you lack the collateral and equity to receive a regular loan.
What's to like in an SBA equipment loan?
Less collateral: The equipment serves as the collateral, and typically, borrowers aren't required to put up additional business assets. Still, it’s important to know that owners with a 20 percent or more share in the business will need to offer their personal guarantees, and typically the loan can be done with a low down payment.
Longer terms: SBA loans tend to have lengthier terms than other equipment loans, typically in the 10- to 20-year range rather than the usual five years, along with a fixed interest rate. If the machinery or equipment is anticipated to outlast the loan (and adds an asset to your business), then an SBA loan might be a good fit.
Quicker answers: Because SBA equipment loans are federally backed, you might think this process would take several weeks. That’s true for many, but it doesn’t have to be. If you choose a lender under the SBA’s preferred lender program, which includes Minnwest Bank, your answer can come in a matter of days.
Even better, the lender at Minnwest would be the one who reviews and approves your application. At Minnwest, you’d work with a financial partner who lives in and understands your community and your business needs.