For small business owners, finding the right financing can be the key to unlocking your true growth potential. While traditional loans can sometimes be challenging to secure, SBA loans offer a pathway designed specifically to help small businesses succeed. Backed by the U.S. Small Business Administration (SBA), these loans provide flexible terms, competitive interest rates, and support for businesses in a variety of industries. Here’s what you need to know about how SBA loans work and why they could be the right choice for your business.
What are SBA loans?
SBA loans are a unique financing option where the government acts as a partial guarantor for loans provided by banks, credit unions, etc. This guarantee reduces the risk for lenders, allowing them to offer loans to businesses that may not qualify for traditional financing. The SBA doesn’t lend money directly – instead, it partners with lenders to provide funds to businesses with strong potential.
Types of SBA loans
SBA loans are not one-size-fits-all. They come in different programs designed to address specific business needs:
- 7 (a) loan program: the most popular SBA loan provides funding for various purposes, including start-ups and business acquisitions, working capital and equipment purchases, and real estate acquisition. Loan amounts go up to $5 million, with flexible terms and competitive rates.
- 504 loan programs: Ideal for major investments like purchasing commercial real estate or large equipment. This program supports economic development while offering long-term, fixed rate financing up to $5 million.
- Microloan program: Designed for smaller financing needs, this program offers loans of up to $50,000 to help startups or smaller businesses with working capital, inventory, or supplies.
Why choose an SBA loan?
SBA loans offer unique benefits that set them apart from other financing options:
- Competitive interest rates and longer repayment terms, easing the monthly burden on borrowers.
- Easier access to capital: The SBA’s backing encourages lenders to approve loans for businesses that might not meet the stricter qualifications of traditional loans.
- Support for startups and small businesses: programs like microloans cater to entrepreneurs and businesses at an early stage of growth, providing them with the resources to get started.
How to qualify for an SBA Loan
To be eligible for an SBA loan, your business must meet specific criteria:
- Business size, as defined by SBA based on industry and revenue standards
- A good credit profile – while the SBA is more flexible, there is still a general score that must be exceeded to qualify
- Viable business plan: your lender will want to see a clear plan that demonstrates how the loan will be used within the business, and how that loan will eventually be repaid.
- Personal investment: some lenders require proof that a business owner has personally invested funds into the venture
- Additionally, businesses in certain industries (such as gambling, passive real estate, etc.) may not qualify outright.
How to apply
Applying for an SBA loan involves a few key steps:
- Determine the best loan program for your situation: consider your needs and apply for the loan type that best addresses those.
- Find an SBA preferred lender: An SBA certified lender can help guide you through the loan process, but an SBA preferred lender is a certified lender with additional authority to make final loan decisions on behalf of the SBA, allowing for faster approval times compared to a standard certified lender. Minnwest Bank is an SBA preferred lender.
- Gather documentation: be prepared with financial records, tax returns, a business plan, and details about your collateral, if applicable.
- Submit your application: your Minnwest Bank lender will act as a preferred lender and make the loan decision.
- Receive funding: once approved, funds are disbursed, and you can begin using them to achieve your stated goals.
A path to growth
SBA loans are more than just financing: they’re a lifeline for businesses aiming to grow, recover, or stabilize. With competitive rates, flexible terms, and tailored programs, SBA loans provide a unique opportunity for small business owners to access the capital they need. Whether you’re a startup looking for seed funding or an established business ready to expand, SBA loans offer a pathway to unlock your business’s full potential.
Ready to leverage the power of SBA lending?
How do you choose a lender that’s the best fit for your business? The experienced SBA lenders at Minnwest Bank bring a tailored and personal approach to each of our customers.
- Streamlined process: We streamline the loan application process, so you’ll get faster answers and quicker access to funding.
- Flexibility: Our lenders take a consultative approach and will tailor the loan to meet your needs. Your success is very important to us.
- Hometown resource: We work and live in your community. Our expertise on the regional market and SBA lending options culminates into a powerful resource for doers like you.
Ready to get started? Reach out to an SBA Preferred Lender at Minnwest Bank today.
