Navigating the realm of small business loans can be a complex task. One of the most desirable types of business financing on the market are the Small Business Administration (SBA) loans, courtesy of their low interest rates and long repayment terms. However, they are generally slower to fund and require a lengthy application. If you're a business owner considering an SBA loan, Trust Capital Funding is your ultimate resource. With various loan options and a streamlined approval process, Trust Capital can help your business get approved quickly.
SBA loans come in various types, each with its unique features. In this article, we’ll explore some types of SBA loans available and discuss the pros and cons of these type of loans.
Types of SBA Loans
7(a) Loans: This loan is the SBA's primary program for assisting startups and existing small businesses. It provides guarantees for loans to small businesses for a variety of purposes, including working capital and purchase of real estate and equipment. The repayment term can be up to 25 years for real estate and up to 10 years for working capital. Interest rates are negotiable but capped by the SBA. Fees for the 7(a) loans vary based on the loan amount.
CDC/504 Loans: The 504 Loan program is designed to foster economic development by providing small businesses with long-term fixed-rate financing for major fixed assets, such as land and buildings. It comes with a repayment term of 10 to 20 years, and its interest rates are typically below market interest rates. The fees associated with 504 loans include a guaranty fee, a servicing fee, and a CDC processing fee.
Microloans: The SBA Microloan program provides loans of up to $50,000 to help small businesses start and expand. The average microloan is about $13,000. The maximum repayment term for an SBA microloan is six years, and the interest rates vary based on the intermediary lender.
The EIDL Program: One significant offering by the SBA is the Economic Injury Disaster Loan (EIDL) program, which has been especially crucial for businesses impacted by the COVID-19 pandemic. This program provides long-term, low-interest loans to businesses and nonprofits that have experienced certain declared disasters. Unlike traditional SBA loans, the EIDL can be used to cover operating expenses, such as debts and payroll, that could have been paid if the disaster hadn’t occurred. Its low-interest rates (3.75% for businesses and 2.75% for non-profits) and extended repayment terms of up to 30 years make it an attractive option for businesses in need of flexible, long-term financial support.
The PPP Program: In contrast, the Paycheck Protection Program (PPP) was a temporary measure introduced to provide relief to businesses affected by the pandemic. Through the PPP, businesses could secure loans to cover payroll costs and other expenses. A distinguishing feature of the PPP was its forgiveness aspect—if businesses used the funds according to guidelines (at least 60% on payroll costs), they would not have to repay the loan. Although the PPP program has now ended, it represented a landmark effort in providing swift and substantial support to businesses in a time of extraordinary economic challenge. Trust Capital Funding, as an SBA-approved lender, was able to facilitate both EIDL and PPP loans, assisting numerous businesses in navigating these programs efficiently and effectively.
Pros and Cons of SBA Loans
While SBA loans come with a host of advantages, they are not without drawbacks. Let's explore the pros and cons of SBA loans:
Low interest rates
Long repayment terms
Access to large sums of capital
Lengthy application process
Slower funding times
Requires substantial documentation
Qualifications for an SBA Loan
In order to qualify for an SBA loan, you typically need to have a good credit score—at least 690 or higher. SBA lenders will often, but not always, look for high annual revenue, and at least two years of business history on the books.
Documents Needed for an SBA Loan
Applying for an SBA loan requires the following documents:
Voided business check
Profit & loss statements
Business tax returns
Personal tax returns
Business debt schedule
Trust Capital Funding, a leading provider of SBA loans, brings you a more personal and flexible approach to lending. As a direct lender, we offer weekly payments for business financing, unlike most lenders who only offer daily payments. Furthermore, our free instant preapproval form online makes the process even more convenient.
So, whether you're looking for a microloan, a 7(a) loan, or a CDC/504 loan, Trust Capital Funding is here to support your business growth with the right SBA loan. Click Here to get started on the SBA process and get your business the help it deserves.