4 Ways Your Business Can Benefit From SBA Loans

sba washington

There’s no doubt SBA loans are one of the best financing sources available in the market for small business owners. While numerous loan programs enable business owners to secure financing, the benefits SBA Washington offers trumps all of them. If you can qualify for an SBA loan, you’ll find that it comes with a variety of advantages over other sources of financing. It offers longer repayment terms, longer interest rates, and flexibility of use, among other attractive benefits.

Related: 6 Tips You Need to Know Before Applying for SBA Loans

Entrepreneurs often need additional financing to fund their growing business. While they can fund their businesses out of their pocket, it’s an impractical solution when there are a lot of financing companies they can borrow money from. Even the government are now supporting small businesses. This is then where SBA loans come in.

If you need more reason why you should apply for an SBA loan, here are the benefits it can give your growing company:

1. Longer Repayment Terms

It’s safe to say that a majority of business owners are hoping for long repayment terms when applying for a loan. An ideal business loan that’s just right for you comes with a payment schedule that does not put a strain on your business.

Bear in mind though, virtually all small business loans come with short repayment terms. Short-term loans, as the name suggests, can only be repaid in as little as three months (with daily or weekly regular payments). Traditional business loans offered by banks typically give you up to five years to repay the borrowed amount.

SBA loans give small business owners more cushion because they generally give you 25 years to repay a real estate loan, 10 years for equipment and machinery, and up to seven years for working capital. With longer repayment terms, you’ll have an easier time calculating how your payment plan can fit seamlessly into your business plan.

2. Lower Interest Rates

As a business owner, you’re conscious of how much a business loans can cost your business. Interest rates are a great concern when applying for financing since lower interest rates mean lower payments and greater business savings.

The good news is, interest rates on SBA loans are typically lower than other more traditional business loans. While the interest rates on your loan will vary and will be dependent on your business’ creditworthiness, SBA 7(a) loan rates can be as low as 6.75%. The rates associated with CDC/504 loans and microloans are different, but also inexpensive. Unlike other types of term loans, SBA rates don’t increase past 10%.

3. Flexibility of Use 

Other types of loans come with terms and conditions that strictly dictate how you can use the funds. If you’re applying for a loan in order to fund a specific need (like real estate or equipment and machinery), then the flexibility of use may not be that important.

However, most business owners applying for SBA loans need the funds for a variety of business expenses. While lenders require you to submit a detailed plan on how you’re going to use the funds, business owners need the flexibility of use for unexpected business expenses.

For SBA 7(a) loans, you can use the money to fund various business expenses that include refinancing existing debt, expanding your business, buying necessary supplies, adding to working capital, purchasing inventory or equipment, and even buying real estate.

4. Availability of Capital

Since the last recession, banks have been stricter when it comes to the types of business they approve. Small businesses, especially, find it hard to qualify for a traditional bank loan because banks view them as high risks. And as you may know, banks like to be sure. They want to make sure that the money they lend will be returned.

However, the federal government has also seen how small businesses can generate an impact on the economy. Because of that, they have partnered up with lending companies and banks that offer small businesses SBA backed-up loans. With one, entrepreneurs can borrow up to $5.5 million through the SBA Washington 7(a) program. Since the government backs up at least 85% of the loan, banks and lending companies are more confident to let you borrow large amounts.

Small business, in turn, benefits from this since they will have access to a larger capital. They can then use the cash for purchasing equipment, renovations, expansion, or when opening a new location. In short, there’s no limit to what businesses can achieve with that amount of loan.

Related: Top 10 Financing Choices to Raise Capital for Your Startup

SBA Washington: Small Business Loans for You

There’s no denying the benefits of having more cash to spare for investments and other business opportunities. With SBA Washington, entrepreneurs can secure enough funding to maximize their business’ growth. The best part of SBA loans is that even if you’re not approved, there are a lot of other resources you can utilize in order for your business to succeed.

Ezra Cabrera
Ezra Neiel Cabrera has a bachelor’s degree in Business Administration with a major in Entrepreneurial Marketing. Over the last 3 years, she has been writing business-centric articles to help small business owners grow and expand. Ezra mainly writes for SMB Compass, but you can find some of her work in All Business, Small Biz Daily, LaunchHouse, Marketing2Business, and Clutch, among others. When she’s not writing, you’ll find her in bed eating cookies and binge-watching Netflix.

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