What is an SBA Loan and How to Apply for One

There are plenty of businesses out there that cannot stay afloat on their own. It is an understandable situation, especially when it comes to highly competitive industries. It can be a vicious cycle, as a startup often requires an extra push to realize its full potential, but many cannot get the revenue they need to successfully break even.

For such businesses, there are plenty of types of business loans available. There are loans such as the business equipment loan, which can help a company purchase equipment without being overloaded, or the asset-based loan, which is based on collateral. That said, one of the most important loans for a struggling company is the SBA loan.

What is an SBA loan exactly?

While it is called a loan, the Small Business Administration loan is a program that is built to help both lender and borrower with the help of the government. After all, lenders often go through plenty of risks as they conduct business with different companies. There are loan types such as the unsecured loan, which means the lender has no means to get any of the money back in the event that the business bails out and refuses to pay.

The government helps lenders by guaranteeing a return on their investment even if the company is unable to pay. It can go as high as eighty-five percent, which is why many lenders are taking the plunge.

What about the interest rates?

Surprisingly enough, the interest rates when it comes to SBA loans are quite low – some of the lowest when compared to other kinds of loans. It is a boon for both the borrower and the lender alike, as it lowers the overall financial risk. While there might be no such thing as the ideal loan when compared with everything else, the SBA loan comes quite close! That said, it does not mean that all companies qualify for an SBA loan.

How does one apply for the SBA loan?

There are plenty of services willing to help you apply for SBA loans. Become is one such service, as well as many others willing to help startup companies in their time of need. It is typically an online form, though it does not mean that you immediately qualify. While the process itself is relatively stress-free, there are still things you need to watch for. A high personal and business credit score can go a very long way. It is also often a good idea to have formed a relationship with potential lenders before attempting to apply. Last but certainly not least, if you are willing to risk collateral for a loan, it could give you an edge when choosing lenders.

Without a doubt, the SBA loan is one of the more ideal loans to have for most small businesses. Not only is it a relatively low-risk venture for your company, but it is also good for the lender as well.