Running your own business comes with a lot of decisions. There’s no getting around all of the choices that must be made in regards to hiring employees, buying equipment and office space, advertising products and services and of course – paying for all of your expenses. One method of obtaining financial help is through the Small Business Administration. Here are three important advantages to SBA loans:
Banks aren’t thrilled about taking risks and when you look at it from their point of view, it’s easy to see why. When it comes to considering a business that is just starting up or needs additional help along the way, banks have to risk the possible scenario of the enterprise folding which ends in a loss to themselves. Enter the SBA which partners with banks to ensure there’s a backup plan in case this happens. The SBA guarantees up to 85% of the loan amount if the borrower should default. This translates to less risk for the banks and therefore, gives them more confidence to lend you money. Consequently, you can receive more capital, even up into the millions, for your next venture.
It’s a known fact that interest payments can add up after awhile, leaving you high and dry down the road. They can be an additional concern along with all of the other expenses of keeping a business up and running. Fortunately, SBA loans offer low rates compared to other types of loans and can even dip down into the single digits, rather than the double digits which is the case for many other kinds of loans. This can make quite a difference when it comes to making your payments each month and it’s a great advantage when you have to create a budget plan for the long haul.
As much as you might be an excellent planner, running a small business is still unpredictable at times. That’s why it’s a good idea to give yourself some extra time to repay your loans, in case something comes up that you don’t expect. With an SBA loan, you could have the option of up to seven years to pay off your loan for working capital, 10 years for equipment financing, or 25 years for real estate. More time means that you can plan out how you’ll repay your loan and you also give yourself more flexibility for when cash flow might be lower or higher depending on how your business is doing throughout the year.
Of course, the application process for SBA loans requires time and effort. But these three advantages make them a worthy option to consider.