Small Business Administration or SBA loans, are also often referred to as 7(a) loans. Whatever term you use, they are one of the best ways to finance a small business. Not only are these loan types federally guaranteed but they also offer low interest rates and flexible loan terms. As popular as they are, however, 7(a) loans can be difficult to get. If you’re choosing to go this route with your small business, there are three things to know.
Enjoy Flexible Loan Terms
Generally speaking, SBA loans usually have low percentage rates. However, they also have longer loan terms. For instance, if you need working capital or financing for daily operations, your loan term could be as much as seven years. For real estate purchases, you’re looking at a loan term of up to 25 years. New equipment purchases are somewhere in the middle with about 10-year loan terms. Another bonus for 7(a) loans is that they can even be used to refinance existing property, and many other small business owners will use SBA loans as a way out of a tricky situation.
Know the Loan Requirements
Before you get to applying for a loan, make sure that you have all the required documentation squared away. you’ll need personal financial statements including tax returns as well as those for your business. If you’ve applied for financing before, the SBA will likely ask for a loan application history. Keep in mind that the loan requirements will vary between different financial institutions, and it’s a good idea to get a pretty solid history of all of your personal and business financial history before you go to apply. Not having the right documentation right upfront will slow your application process.
Select the Right Financing for You
Choosing the right financial institution is key to getting the best 7(a) loans. Work with the SBA to get a list of potential lending institutions and then call a few of them. Ask about how many loans they do per year, how experienced the staff is, and what the average dollar range of loans they close is. Asking these questions is paramount to determining whether they have the experience with your business type and capital requirements to help you.
Ultimately, choosing SBA loans could be a good decision for you and your business. There are many people who are living their dreams and achieving goals with the help of 7(a) loans. If you’re looking at ways to come up with the capital you need to start a new business or to help you reach your career objectives in your existing one, the SBA may be able to help.