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SBA Loans 101: Why You Need to Consider it as a Financing Solution

Application paper for an SBA loanSBA loans are loans issued to small companies for equipment purchases or working capital to help grow their businesses. Participating lenders issue them, and the SBA partially guarantees them. How much the SBA can guarantee will depend on the amount of your loan.

The SBA may be able to guarantee up to 85% of your loan if it’s less than $150,000 and 75% if it is greater than $150,000. An SBA loan in Ogden from institutions such as Wasatch Peaks Credit Union is the best option if you want to open a new branch, refinance an existing loan, or hire new employees for your business in Ogden.

Types of SBA Loans

There are various kinds of SBA loans. Each one with its own terms and requirements. They are as follows:

  • 7(a) loan program
  • 504 loan program
  • Microloans
  • SBA disaster loans

Advantages of SBA Loans

New business owners without enough collateral find it hard to get a loan because lenders hesitate to issue loans to them. But with the SBA’s guarantee, these small businesses are now able to get the funding they need to grow their businesses.

SBA loans also provide longer loan maturity but with more affordable monthly payments. The down payment for the loan is also much lower than other financing options. This helps businesses get better cash flow.

Who are Eligible for an SBA Loan?

An SBA loan is a great option for small businesses. However, not all small businesses will qualify for an SBA loan. There are still requirements and general characteristics to meet.

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For example, a business must be in operation for at least two years; the business owner must have a personal credit score of 690 and above; the company has a minimum of two tax returns proving that it is profiting; and a proof that the business has enough financial strength relative to the requested amount of the loan.

In some cases, some lenders would also require collateral. These are usually the main pre-requisites to qualify for an SBA loan, but your lending company may request for other documents.

Final Thoughts

Securing a loan is one of the many ways to get funds to grow your business, and an SBA loan might just be what you are looking for. However, like any other financing solution, you need to be diligent and do your own research before signing on the dotted line.

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