If you are a small business owner you are aware of the challenges of acquiring funds for expansion and growth. Things get more complicated and difficult when times are uncertain or you face revenue losses. How can you arrange for direct funding in such a situation? There are ways to get small business funding and one such loan that could reverse your fortunes is the SBA 7(a) loan.
Why do you need a SBA 7(a) loan?
SBA 7(a) loans are for buying business essentials like machines, working capital, real estate, and inventory. These are financial tools created by the SBA or Small Business Administration for extending financial assistance to small business owners. While these are not loans from the SBA directly, they enable entrepreneurs to obtain monetary assistance. This becomes possible by guaranteeing part of the borrowed amount, limiting fees, and capping interest rates. digitallabstudios
How SBA 7(a) loans work:
- The SBA 7(a) loan can be of many sub-types, each to cater to a specific need. You will therefore find the loans in varying amounts as they address diverse business requirements. The main purpose of these loans is to encourage the lender to offer fair loans to enterprises which are unable to get funds on reasonable terms. For example, the SBA 7(a) has successfully facilitated almost 42,000 loans in the past year.
- To start processing such a loan, you have to identify an SBA-approved lender. Most of these loans will let business owners borrow a maximum of $5 million. SBA will decide on an interest rate but you and the lender are free to negotiate it. Interest rates will depend on loan size, prime rates, and loan maturity. SBA loans are also designed to guard businesses against specific fees but may impose pre-payment penalties during the first 3 years. luckymuttsanimalrescue
- As a business owner you can use these loans to hire or train new employees. You can buy business equipment, start operations in a new location, expand your current business, or update hardware/software. So, in short, the loans can help you handle different types of business needs. Unlike other conventional loan types, these provide higher borrowing limits. Besides, you can enjoy longer repayment terms and lower rates of interest. The only problems in getting the loan are the credit score and collateral requirements.
- To get the SBA 7(a) loans you must find a direct lender because the SBA will not hand over the loan to you directly. Once a lender is identified, he will make you complete an application. You have to work with him on the paperwork that the SBA demands. Besides, you have to submit documents required for business loans, like financial details about the business and individual financial statements.
- To be eligible for the SBA 7(a) loans, you must be SBA-certified as a small business, must operate in the US, and its territories. You must also have resources for investing assets in the business and declare that the loan is for a sound purpose. Besides, you need to prove that you have resorted to other financial resources prior to seeking this loan.
Once you have submitted your application, you can expect the loans to be given within 7-10 working days. You cannot however expect to get this kind of direct lenders funding if you are engaged in illicit activities or deal in rare stamps and coins. You will also be denied loans if you are a lender, bank, or insurance company, or engaging in speculative activities outside regular business practice.