Reduced Underwriting Requirements For Higher Loan Amounts & Extended Terms
SBA loans are small business loans made through banks, credit unions and other lenders who partner with the SBA. SBA loans are designed to help borrowers who may not meet the lending standards set by most banks by providing a government-backed guarantee on part of the loan which reduces the risk for the lender and makes approvals easier and with more flexible terms.
The SBA loan programs are available to both new and established businesses with the primary objective being to enable loans for longer repayment periods because of the looser underwriting criteria due to the SBA guarantee. However, these programs can also enable owners with bad credit to qualify for a term loan they may not have otherwise been able secure.
With SBA loans, a business can qualify even if the yearly payment approximates previous year's profit while most traditional banks require the annual payment for loans to be no more than two-thirds of prior year's operating profits. The lower payments, longer terms and loosened underwriting guidelines also increase the amount that can be borrowed under the SBA programs.
The SBA Loan programs available include:
Requirements for an SBA Loan Application are significantly more in terms of paperwork, forms, and disclosures than a traditional bank term loan, so, if you can't document sound financials for the business, a Revenue Based Loan such a Merchant Cash Advance may be your only option.
Loan Guarantee, Fixed Asset Financing & Microloan Programs
The most popular of the SBA Loan Programs is the SBA 7(a) General Small Business Loans. The SBA 504 loans are generally used for new construction and real estate acquisition or renovation; and the Microloan Program is similar to the 7(a) General Business Loans, but limited to a maximum of $50,000.
Following is a comparison of the available SBA Loan Programs: :
|SBA 504||SBA 7(a)||SBA Microloan|
|Amount||Up to $5 million||Up to $5 million||Up to $50,000|
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