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SBA loans are a smart financing tool for businesses

For many businesses, partnering with a bank is critical to their success. Having access to financing can help in a variety of ways and allow an operation to grow without needing to rely solely on personal funds. Small Business Administration (SBA) loans are a key part of this financing equation.

Nearly 70% of small business owners say they rely on some personal savings to help with financing1. These owners are clearly willing to invest in their operations to make them successful, but being overly reliant on personal savings presents its own challenges, which is why many owners turn to outside financing as well. Forty percent of small businesses sought loans, lines of credit or cash advances in 2022, and 72% of small businesses report having some amount of outstanding debt1.

Outside financing can help lessen the reliance on personal savings and give businesses of all sizes a short-term boost, with anticipated future profits used to pay off the debt. However, with so many business owners seeking out loans and lines of credit, competition for available capital can be fierce, particularly in tighter lending environments. This is where an SBA loan or line of credit can be a great alternative.

The benefits of an SBA loan

SBA loans give business owners another avenue to explore for financing. In 2022, roughly 57,000 SBA loans totaling $35 billion were provided to businesses in various industries2.

These loans are a great option when an owner is unsure about qualifying for traditional financing. For instance, an owner of a business might not have enough money available to meet the down payment requirements of a conventional loan. Another owner might want more time to pay off the debt than a typical loan allows based on the company’s regular cash flow.

Because SBA loans often feature lower down payments and longer repayment terms, they can help in these exact situations. In addition, because the loan is government backed, the bank will often utilize that guarantee when there is a lack of collateral.

A wide array of uses

I wrote previously about the different types of SBA loans that are available and why it’s so important to work with an SBA Preferred Lender. These lenders have experience navigating government guidelines and can help a business owner find the right option.

It’s also worth noting that many different types of businesses are eligible for SBA loans, and loans can be used in a variety of ways. The SBA’s flagship program, a 7(a) loan, can fund startup costs, business acquisitions/partner buyouts, equipment purchases, working capital needs, debt refinance and more through a maximum loan size of up to $5 million.

Because of the benefits to borrowers, as well as the wide array of potential uses, SBA loans remain a popular option for business owners. If you’re in business and want to learn more, consider reaching out to an SBA Preferred Lender today.





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About Brandi Nelson

Brandi has worked in commercial banking since 2003. She builds long-term client relationships based on prudence, responsibility and trust while helping individuals, families, foundations and other organizations establish and meet their financial goals. By understanding your objectives and risk tolerances she will integrate cash and credit strategies into your business planning. Before assuming her current role, Brandi served as vice president of SBA lending at Falcon National Bank, SBA business development officer at U.S. Bank and prior to specializing in SBA served as a trusted commercial lender for 10+ years. Brandi holds a Busines...

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