Before we learn what an SBA loan is, let’s talk about what the Small Business Administration (SBA) is. The SBA is a federal agency dedicated to helping small businesses and entrepreneurs with counseling and capital, making it an essential go-to resource and voice for small businesses.
What are SBA loans?
- SBA loans are loans that are designed and backed by an SBA program and provided by approved lenders . SBA 7(a) loans can be used for working capital, equipment purchase, real estate purchase, debt refinance, and more.
How is an SBA loan backed by the federal government?
- The federal government reduces some of the risk that lenders take on by guaranteeing up to 85% of the loan. This allows lenders to offer financing to candidates who otherwise may not be considered.
How do you qualify for an SBA loan?
- Small businesses must meet eligibility requirements set by the SBA regardless of whether they’re applying through a lender or a loan program. Location, ownership, type of operations, business size, financing need, and trustworthiness are all contributors to eligibility.
What is an SBA Preferred Lender?
- Preferred Lenders have delegated authority from the SBA to process, close, and service SBA loan applications independently—shortening wait times for the small business.
How long does the SBA 7(a) process take?
- Timelines vary depending on the lender’s processes and can range from a few days to 30-60 days after submission, depending on completeness, corrections, collateral, and other factors.
Do you have to pay back an SBA loan?
- Yes, SBA loans have to be paid back. The SBA guarantees a portion of loans for lenders, it does not forgive them. Defaulting on an SBA loan can lead to negative impacts on your credit score, bank account levies, wage, tax, and security garnishments.
There are many benefits to securing an SBA loan, such as lower rates, longer terms, and relaxed credit requirements. SBA’s mission makes it possible for small businesses to have access to capital to grow, thrive, and serve their communities.