Everything You Need to Know About SBA Loan Rates: Small businesses undergo many challenges. As a way of encouraging business owners, the federal government offers loans to help struggling businesses and those affected by natural disasters get back on their knees. SBA business loans are guaranteed partially by the United States Small Business Administration. The loans are offered through selected lenders, usually banks.
SBA loans have stringent rules that must be followed by the recipients. However, their low-interest rates and flexible terms are what make them attractive to most business owners.
What is an SBA loan?
According to Lantern by SoFi, “Interest rates impact all sorts of financing tools, from mortgages to credit cards, both business and personal. One of those tools is the SBA loan.” An SBA is a government-sponsored business loan meant to help cover business expansion, real estate purchase, startup cost, and many more.
Although the loan is issued by a private lender, it is covered or guaranteed by the federal government. What happens is that you apply for an SBA via a bank or lending institution. The lender will then apply to the SBA for a loan guarantee. This means that the government will pay the lender the principal and interest in case you default.
SBA loan change
Recently, SBA started accepting applications for the coronavirus Economic Injury Disaster Loan. The loan applications will be processed until all the allocated funds are finished. Some of the changes that came as a result of the COVID-19 pandemic include:
- Increase of loan limits: a borrower can now apply for up to $2 million from the previous amount of just $500,000.
- Extension on repayment terms: If you are a COVID-19 EIDL borrower, you can only start repaying the loan two years after disbursement.
- Eligibility of fund usage has been expanded: Unlike before, borrowers have been allowed to spend the loan money to prepay their commercial debts or repay their federal debts.
Where to get an SBA loan?
You can get an SBA loan from any SBA-approved lender. This can be a bank, credit union, or any financial institution accredited to offer SBA loans.
What is required to qualify for an SBA loan?
There are different types of SBA loans to choose from. Each of these types comes with its own terms and conditions. The most appropriate SBA loan for you will basically be determined by the purpose of the loan. You should scrutinize each of the SBA loan options and determine which one best suits you.
Benefits of SBA loans
One of the things that makes SBA attractive is low SBA loan rate. The federal government requires lenders to charge specific rates to borrowers.
This is another major advantage of SBA loans. The term of the loan will be determined by how you plan to use that loan.
SBA loan fees usually comprise an upfront guarantee fee based on the amount of the loan as well as the maturity of the loan. The fees are reassessed annually by the SBA.
How to apply for an SBA loan?
The first step is to find out if your business is eligible for the loan or not. The next thing is to prepare your documents and choose a lender. After that, you wait for approval of the loan.
In general, there’s a lot of information about SBA loans. You need to understand all the requirements to increase your chances of getting approved.