The Pros and Cons of SBA Loans

Small Business Administration (SBA loans) are loans backed by the Small Business Administration. The SBA doesn’t lend the money; banks and other lenders do that. The SBA simply guarantees a large portion of each loan to reduce the lender’s risk.

Let's get started.

The Pros and Cons of SBA Loans

Small Business Administration (SBA loans) are loans backed by the Small Business Administration. The SBA doesn’t lend the money; banks and other lenders do that. The SBA simply guarantees a large portion of each loan to reduce the lender’s risk.

Types of SBA Loans

There are several SBA loan types.

  • SBA 7(a): The main type of SBA loan. You can borrow up to $5 million in 7(a) loans.
  • SBA Express: A smaller 7(a) loan with a faster approval process.
  • SBA 504: Designed for acquiring fixed assets.
  • CAPLines: An SBA line of credit. There are several types of CAPLines, each for a different purpose.
  • Export Working Capital: Used to fund operations related to export sales.
  • Export Express: A faster turnaround version of the Export Working Capital loan.
  • Microloans: Small loans designed for sm

When you’re busy running your business, it’s hard to find time to learn the intricacies of each SBA loan type. Business Capital Consultants can handle this for you. We can educate you on your loan options and find the best one for your business.

With that said, here are the general benefits and drawbacks of getting a loan backed by the SBA.

The Pros of SBA Loans

  • Broad Requirements

Barring specific types of SBA loans — such as the export-related funding vehicles — SBA loans have broad requirements. Of course, lenders have their own criteria that may be more stringent.

  • Easier to Qualify For Than Term Loans

Younger businesses often struggle to get term loans, as term lenders ask for several years of credit history and tax returns. The SBA’s guarantee cuts the lender’s risk, so the lender may consider businesses with shorter histories.

  • Loan Types

The SBA offers several types of loans, from their standard 7(a) to 

  • Loan Amounts Offered

The SBA offers up to $5 million, depending on the type of loan you choose.

  • Interest Rates

Thanks to the guarantee, SBA loans come with capped interest rates. The SBA sets a base rate, then provides a spread within which the lender can add to the base rate. This prevents the lender from offering you too high of an interest rate.

  • Helpful Resources

The SBA partners with Small Business Development Centers all over the US. These SBDCs offer small business owners affordable training and consulting on various aspects of starting and growing a business.

  • Assistance For Business Owners in Underserved Communities

The SBA doesn’t offer loans specifically for minority-owned and women-owned businesses. However, the SBA 8(a) Business Development Program makes it easier for these businesses to qualify for existing SBA loan products. 

The 8(a) program provides other benefits to minority-owned and women-owned businesses as well:

  • Assistance with finding and landing government contracts
  • Pairing newer companies with more established enterprise through a mentor-protege program
  • Help with management, training, and marketing

The Cons of SBA Loans

  • Credit Requirements

Although standard 7(a) loans have broad requirements, the SBA demands that you have a high credit score. If your credit score isn’t great, Business Capital Consultants is happy to help you find a more accessible funding source.

  • Personal Guarantee

Any business owner with a 20% or larger share of the business must provide an unlimited personal guarantee. If the business is unable to pay the loan back, these owners must use their personal assets to cover the debt. 

  • Collateral

The SBA requires lenders to take collateral on certain loans, such as 7(a) loans exceeding $350,000. 

  • Processing Times

Standard 7(a) loans can take weeks to process, as the SBA has to approve the guarantee for the lender. Express loans don’t take as long, but interest rates are higher, and borrowing amounts are lower.

In either case, Business Capital Consultants can help you choose which type of SBA loan works for you. If that means an SBA loan, we’ll handle the application and correspondence so you can keep working on your business while you wait.

Is an SBA Loan Right For You?

Many entrepreneurs could benefit from an SBA loan, but they don’t know which one to choose. Beyond that, they may not understand the application process.

Business Capital Consultants is here to help you find the best SBA loan. We’ll help you understand your options and handle the application process for you. Schedule your free 30-minute consultation with Business Capital Consultants today.

Business Capital Consultants is here to help if you aren’t sure which short-term financing source is right for you. We’ll deal with the paperwork and phone calls for you so you can get the funding you need without wasting valuable time.

Helpful Tips & Information

How to Buy a Business With a Business Acquisition Loan

How to Buy a Business With a Business Acquisition Loan Starting and growing a business can be rewarding, but it isn’t easy to build something from the ground up. Let's get started. $ How much do you need? $10,000-$30,000 Between $30,000-$50,000 Between $100,000 - $200,000 Between $200,000 - $300,000 Between $300,000 - $400,000 Between $400,000 - $500,000 Between $500,000 - $600,000 Between $600,000 - $700,000 Between $700,000 - $800,000 Between $800,000 - $900,000 $900,000 plus 🢓 {{ vc_btn: title=SEE+YOUR+OPTIONS&shape=round&i_icon_fontawesome=fas+fa-angle-right&add_icon=true&link=url%3Ahttps%253A%252F%252Fbeforeyouborrow.com%252Fprequalify%252F%7C%7Ctarget%3A%2520_blank%7C&el_class=hdr-btn&css=.vc_custom_1596646581248%7Bmargin-bottom%3A+0px+%21important%3B%7D }}How to Buy a Business With a Business Acquisition Loan Starting and growing a business can be rewarding, but it isn’t easy to build something from the ground up. Instead, you might consider buying an existing business.  An existing business has a proven business concept. You’ll save a lot of time by not having to do the work of starting a business — picking a location, buying inventory/supplies, and creating compelling marketing to acquire customers, to name a few. But when you opt for buying a business over starting one, you’re trading the hard work of building something from scratch with the complexity of acquiring an existing entity.  Among the necessary considerations of buying a business is financing the purchase. Few [...]

Here’s What You Need to Know Before Getting Short-Term Business Loans

Here’s What You Need to Know Before Getting Short-Term Business Loans Debt can be a tremendous business resource when you use it right. But your situation doesn’t always warrant a loan with a decade-long repayment term. Let's get started. $ How much do you need? $10,000-$30,000 Between $30,000-$50,000 Between $100,000 - $200,000 Between $200,000 - $300,000 Between $300,000 - $400,000 Between $400,000 - $500,000 Between $500,000 - $600,000 Between $600,000 - $700,000 Between $700,000 - $800,000 Between $800,000 - $900,000 $900,000 plus 🢓 {{ vc_btn: title=SEE+YOUR+OPTIONS&shape=round&i_icon_fontawesome=fas+fa-angle-right&add_icon=true&link=url%3Ahttps%253A%252F%252Fbeforeyouborrow.com%252Fprequalify%252F%7C%7Ctarget%3A%2520_blank%7C&el_class=hdr-btn&css=.vc_custom_1596646581248%7Bmargin-bottom%3A+0px+%21important%3B%7D }}Here’s What You Need to Know Before Getting Short-Term Business Loans Debt can be a tremendous business resource when you use it right. But your situation doesn’t always warrant a loan with a decade-long repayment term. Sometimes, you need cash for the short-term.  If you need quick financing now but don’t want to lock yourself into a long-term arrangement, you may consider a short-term loan. Here’s what you need to know. Types of Short-Term Business Loans Term Loans Term loans are what you think of when you hear “loan”. They’re loans you get from a bank or similar lender. They tend to (but not always) require collateral.  Short-term loans have maturities of a year [...]

Can You Get a No Credit Check Business Loan?

Can You Get a No Credit Check Business Loan? Credit often stands in the way of success for businesses. Perhaps you have poor or no credit. Maybe your credit is fine, but you’d rather keep a clean report. Let's get started. $ How much do you need? $10,000-$30,000 Between $30,000-$50,000 Between $100,000 - $200,000 Between $200,000 - $300,000 Between $300,000 - $400,000 Between $400,000 - $500,000 Between $500,000 - $600,000 Between $600,000 - $700,000 Between $700,000 - $800,000 Between $800,000 - $900,000 $900,000 plus 🢓 {{ vc_btn: title=SEE+YOUR+OPTIONS&shape=round&i_icon_fontawesome=fas+fa-angle-right&add_icon=true&link=url%3Ahttps%253A%252F%252Fbeforeyouborrow.com%252Fprequalify%252F%7C%7Ctarget%3A%2520_blank%7C&el_class=hdr-btn&css=.vc_custom_1596646581248%7Bmargin-bottom%3A+0px+%21important%3B%7D }}Can You Get a No Credit Check Business Loan? Credit often stands in the way of success for businesses. Perhaps you have poor or no credit. Maybe your credit is fine, but you’d rather keep a clean report. Is it possible to find funding without lenders prying into your credit score? At BCCUSA, we aim to help you get the funding you need, no matter your situation. For your business, that might mean exploring alternatives to traditional financing vehicles that require credit checks. Learn more about your options below. Why Do Lenders Check Your Credit? When lenders lend, they’re bearing risk. Your business may fall on hard times and be unable to [...]

Are Business Loan Brokers Worth Hiring?

Are Business Loan Brokers Worth Hiring? As a small business owner, the only thing standing between you and growth is sometimes a lack of funding. You have fantastic opportunities in front of you, but you lack the capital you can invest in them. Let's get started. $ How much do you need? $10,000-$30,000 Between $30,000-$50,000 Between $100,000 - $200,000 Between $200,000 - $300,000 Between $300,000 - $400,000 Between $400,000 - $500,000 Between $500,000 - $600,000 Between $600,000 - $700,000 Between $700,000 - $800,000 Between $800,000 - $900,000 $900,000 plus 🢓 {{ vc_btn: title=SEE+YOUR+OPTIONS&shape=round&i_icon_fontawesome=fas+fa-angle-right&add_icon=true&link=url%3Ahttps%253A%252F%252Fbeforeyouborrow.com%252Fprequalify%252F%7C%7Ctarget%3A%2520_blank%7C&el_class=hdr-btn&css=.vc_custom_1596646581248%7Bmargin-bottom%3A+0px+%21important%3B%7D }}Are Business Loan Brokers Worth Hiring? As a small business owner, the only thing standing between you and growth is sometimes a lack of funding. You have fantastic opportunities in front of you, but you lack the capital you can invest in them. While researching your options, you may have come across business loan brokers. These companies aren’t banks or lenders — rather, they analyze your financial situation, then leverage a network of lenders to find the optimal credit product for your business. Of course, brokers charge a fee for this service.  Are business loan brokers worth hiring? Why not look for financing on your own and [...]

7 Ways to Use a Business Capital Loan

7 Ways to Use a Business Capital Loan Massive, long-term loans aren’t always necessary for business growth. A shorter-term solution that’s easier to acquire might be just what you need. Let's get started. $ How much do you need? $10,000-$30,000 Between $30,000-$50,000 Between $100,000 - $200,000 Between $200,000 - $300,000 Between $300,000 - $400,000 Between $400,000 - $500,000 Between $500,000 - $600,000 Between $600,000 - $700,000 Between $700,000 - $800,000 Between $800,000 - $900,000 $900,000 plus 🢓 {{ vc_btn: title=SEE+YOUR+OPTIONS&shape=round&i_icon_fontawesome=fas+fa-angle-right&add_icon=true&link=url%3Ahttps%253A%252F%252Fbeforeyouborrow.com%252Fprequalify%252F%7C%7Ctarget%3A%2520_blank%7C&el_class=hdr-btn&css=.vc_custom_1596646581248%7Bmargin-bottom%3A+0px+%21important%3B%7D }}7 Ways to Use a Business Capital Loan Massive, long-term loans aren’t always necessary for business growth. A shorter-term solution that’s easier to acquire might be just what you need. You might make use of a business capital loan, also known as a working capital loan. Working capital is simply the amount of liquidity you have available. You calculate it by subtracting your short-term liabilities (like accounts payable) from your short-term assets (like cash and accounts receivable). More working capital means you have more funds available to invest in activities that grow your business. Business capital loans typically don’t have as extensive application requirements as traditional term loans. They help cover shorter-term expenses or increase the amount of working capital [...]

7 Easy Business Loans For When Your Credit and Financials Aren’t Perfect

7 Easy Business Loans For When Your Credit and Financials Aren’t Perfect Borrowing can be tough. The more you need the funds, the harder it is to get them. If you’re a new business or have a low credit score, you might feel shut out from the best financing sources. Let's get started. $ How much do you need? $10,000-$30,000 Between $30,000-$50,000 Between $100,000 - $200,000 Between $200,000 - $300,000 Between $300,000 - $400,000 Between $400,000 - $500,000 Between $500,000 - $600,000 Between $600,000 - $700,000 Between $700,000 - $800,000 Between $800,000 - $900,000 $900,000 plus 🢓 {{ vc_btn: title=SEE+YOUR+OPTIONS&shape=round&i_icon_fontawesome=fas+fa-angle-right&add_icon=true&link=url%3Ahttps%253A%252F%252Fbeforeyouborrow.com%252Fprequalify%252F%7C%7Ctarget%3A%2520_blank%7C&el_class=hdr-btn&css=.vc_custom_1596646581248%7Bmargin-bottom%3A+0px+%21important%3B%7D }}7 Easy Business Loans For When Your Credit and Financials Aren’t Perfect Borrowing can be tough. The more you need the funds, the harder it is to get them. If you’re a new business or have a low credit score, you might feel shut out from the best financing sources. Not to worry, though, because you still have several borrowing options. Several traditional and alternative lenders offer easy business loans if your financial picture isn’t perfect. At BCCUSA, we want every hardworking business owner to understand the lending marketplace and know they have options. To that end, we’ve aggregated a [...]

6 Ways to Use a Restaurant Business Loan to Expand

6 Ways to Use a Restaurant Business Loan to Expand The restaurant industry is not an easy business. Some 60% of restaurants fail in the first year. By year four, that number reaches 80%. Let's get started. $ How much do you need? $10,000-$30,000 Between $30,000-$50,000 Between $100,000 - $200,000 Between $200,000 - $300,000 Between $300,000 - $400,000 Between $400,000 - $500,000 Between $500,000 - $600,000 Between $600,000 - $700,000 Between $700,000 - $800,000 Between $800,000 - $900,000 $900,000 plus 🢓 {{ vc_btn: title=SEE+YOUR+OPTIONS&shape=round&i_icon_fontawesome=fas+fa-angle-right&add_icon=true&link=url%3Ahttps%253A%252F%252Fbeforeyouborrow.com%252Fprequalify%252F%7C%7Ctarget%3A%2520_blank%7C&el_class=hdr-btn&css=.vc_custom_1596646581248%7Bmargin-bottom%3A+0px+%21important%3B%7D }}6 Ways to Use a Restaurant Business Loan to Expand The restaurant industry is not an easy business. Some 60% of restaurants fail in the first year. By year four, that number reaches 80%. If you’ve made it past this gauntlet, you might be ready to obtain financing to grow your current location or even open a second one. You’re on the right track if you’re thinking about growth. But what should you invest your restaurant business loan in? Making smart investments now ensures you keep your competitive edge well into the future.  BCCUSA aims to be an excellent resource for small businesses, whether through finding the right funding for each of our clients' unique situations [...]

6 Things Need to Know Before Getting a Fast Business Loan

6 Things Need to Know Before Getting a Fast Business Loan Whether it’s a business emergency or a fantastic opportunity in front of you, you need access to capital now. Not later. Many traditional loans can take a few days (or even weeks) to process. By the time you receive the funds, it’s already too late. Let's get started. $ How much do you need? $10,000-$30,000 Between $30,000-$50,000 Between $100,000 - $200,000 Between $200,000 - $300,000 Between $300,000 - $400,000 Between $400,000 - $500,000 Between $500,000 - $600,000 Between $600,000 - $700,000 Between $700,000 - $800,000 Between $800,000 - $900,000 $900,000 plus 🢓 {{ vc_btn: title=SEE+YOUR+OPTIONS&shape=round&i_icon_fontawesome=fas+fa-angle-right&add_icon=true&link=url%3Ahttps%253A%252F%252Fbeforeyouborrow.com%252Fprequalify%252F%7C%7Ctarget%3A%2520_blank%7C&el_class=hdr-btn&css=.vc_custom_1596646581248%7Bmargin-bottom%3A+0px+%21important%3B%7D }}6 Things Need to Know Before Getting a Fast Business Loan Whether it’s a business emergency or a fantastic opportunity in front of you, you need access to capital now. Not later. Many traditional loans can take a few days (or even weeks) to process. By the time you receive the funds, it’s already too late. Instead, you need a fast business loan. There are plenty of options out there, but no matter which one you pick, you can receive the funds in as little as 24 hours. But it’s easy to overlook crucial [...]