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SBA Loans – Pros & Cons, How to Apply

October 25, 2023 | Tools & Tips

SBA LoansForward Financing is committed to educating small business owners on their funding options. One such option is SBA loans, which Forward Financing does not provide but sees the value for small businesses that qualify.

SBA loans are small business loans offered by the U.S. Small Business Administration and issued by local banks. They can be used for startup costs, working capital, expansions, real estate purchases, and more. There are two types of SBA loans:

  • Standard 7(a) loans which can range from $500,000 – $5,000,000
  • 7(a) small loans which are under $500,000

 

SBA loans can be a great option for some small businesses, but like anything else, there are pros and cons to evaluate:

Pros of SBA Loans

  • Competitive rates
  • Low fees
  • Longer terms (10+ years)

Cons of SBA Loans

  • Difficult to qualify
  • Slow to fund
  • Personal guarantee required

How to Apply

If you’re a for-profit business in the U.S. with an owner who has invested equity (time and/or money) into the business and can demonstrate a need for financing with a purpose for which the funds will be used, you may be able to qualify. To start the process and find a bank near you, the SBA offers a Lender Match tool to match potential borrowers with lenders. You will just need to answer a few simple questions and within two days you’ll receive an email with contact information of lenders who express interest in your loan.

Alternatives

If you’re one of the many small businesses that don’t qualify for an SBA loan or need a faster, more straightforward option, there are alternative business financing solutions to consider, including revenue-based financing. Revenue-based financing, also known as sales-based financing, is a type of funding for businesses that provides access to an upfront sum of working capital in exchange for a portion of the business’s future revenue. That means payments remitted back to the funder can fluctuate based on the business’ revenue too, which is a kind of flexibility that a bank loan can’t offer. To learn more visit What is Revenue-Based Financing. To learn about an experienced and trusted provider of revenue-based financing, visit Forward Financing.