At USAmeriBank we talk every day with prospects about the benefits of a Small Business Administration (SBA) loan. In many cases, the business owners have heard about SBA loans, but don’t fully understand the details associated with the program.
We have discovered that many business owners have preconceived thoughts about SBA loans that are based on misconceptions created from lack of information. SBA loans are a valuable financial tool for the small business owner and we encourage our customers to become educated on all aspects of the program so they can make informed decisions. Some of the more common misconceptions we hear include:
- 1. The SBA lends money directly to business owners – The SBA works with qualified lenders, like a bank or credit union, that lend the small business the money. The SBA guarantees a portion of the loan, allowing the lender to approve loans that they cannot approve conventionally.
- 2. SBA Loans are only for small amounts – Actually, each applicant can borrow up to $5 million for many uses including the purchase of owner occupied real estate, upgrading facilities, purchasing machinery, debt consolidation, and general working capital. The funds can also be used for strategic business expansion including the acquisition of complementary business, buying out a business partner, or launching a new location.
- 3. SBA loans are only for startups – Approximately 25-30 percent of SBA loans were used to launch and start a new venture. That means over 65 percent of SBA loans were used to improve or expand an existing business.
- 4. SBA loan interest rates are higher than other loans – Since the financial institution is making the loan, they are the one who sets the interest rate. The rate is reflective of the risk that the loan presents within the institutions portfolio. Although slightly higher interest rates are not uncommon, the rates and fees are normally comparable to other loan vehicles with similar risk. Interest rates can be negotiated between the borrower and lender and are subject to SBA regulated base rates and spreads.
- 5. SBA loans take a long time – Many business owners assume that obtaining a SBA loan will take several months. Over the past few years, the SBA has made decreasing the processing time for an SBA loan a priority across the organization. In fact, it is possible to get a SBA loan processed and approved within weeks if you are working with an experienced SBA Lender and are able to provide the required information in a timely manner.
As you can see there are many myths that surround the SBA lending process. We encourage individuals interested in obtaining an SBA loan to become educated on the program. Working through the SBA process can be daunting, so your selection of a qualified financial partner is paramount.
USAmeriBank is one of the leading SBA lenders in the country and has assisted business owners in navigating the SBA process many times. To learn more about the SBA Program and how it can help your business grow, call USAmeriBank’s SBA Lending Division at 866.979.2265 or visit us online at www.USAmeriBank.com/SBA.