Comparing Offers

What to Know When Choosing Between SBA Loans & Lendistry’s Conventional Small Business Loans

When seeking funding for your small business, a key early step is determining the kind of financing you need. There are many types of loans, each with varying features, so it’s important to find one that works best for your business.

Depending on what you qualify for, you may need to choose between an SBA loan or a conventional business loan. Knowing the differences between SBA loans and conventional business loans can help you determine which is best for your business.

Once a loan is closed, you cannot make certain changes to your business or collateral without submitting a request and obtaining approval, such as changes of owners, transfer of assets, distributions of company assets, etc.

It’s important to choose the best lending option available from the beginning.

What are SBA Loans?

SBA loans are backed by the U.S. Small Business Administration, which means they’re guaranteed by the federal government. This helps lenders approve businesses that might otherwise struggle to meet lending standards and receive funding. That guarantee is for the lender, though the borrower is still expected to repay the loan.

What are Lendistry’s Conventional Small Business Loans?

In short, these are loans that Lendistry offers on its own terms and requirements, without backing from the SBA.

Characteristics of SBA Loans & Lendistry’s Conventional Small Business Loans

  • Application steps and documents: Because SBA loans have government backing, closing an SBA loan requires more steps and documentation from the applicant than conventional loans typically require.
  • Approval timing: SBA loans often take a bit longer since all SBA Lenders have to go through SBA approval. Working with an SBA Preferred Lender, such as Lendistry, can help reduce the time it takes to get an SBA loan approved, because the SBA has given preferred lenders the authority to approve loans by themselves.
  • There are also important consequences if you miss payments on an SBA or conventional loan. Defaulting on a loan could result in:
    • Wage garnishments: Defaulting on an SBA loan could lead to the federal government garnishing wages from your paycheck. The federal government doesn’t need a court order to do this.
    • Tax and security garnishments: When a borrower defaults on an SBA loan, it is turned over to the United States Department of the Treasury for collection and may impact the borrower and guarantors’ annual tax refunds or social security benefits until the balance is paid.
    • Bank account levies: If the loan requires a personal guarantee, your personal assets such as your bank account could be frozen.
    • Credit Impact: Paying any loan on time improves your small business credit and personal credit score. Missing payments will negatively impact your personal credit score and your business’s. This could make it difficult to qualify for subsequent lines of credit in the future.

When choosing the loan option that is best for you, be sure to ask potential lenders for all the information you need to make your decision. Knowing what to expect when exploring loan options can help you avoid predatory lenders and set your business on a successful path to funding.