Businesses seeking funding often look to SBA loans or conventional business loans. While both have their benefits, Small Business Administration (SBA) loans typically offer lower interest rates and longer repayment terms, making them a more appealing option for many. SBA loans are backed by the government and are available in amounts from $500 up to $5.5 million. They can be tailored to suit a range of business needs including providing working capital and long-term investment.
Eligibility for an SBA loan does vary, with additional requirements contingent on the specific type of SBA loan being sought. Conventional small business loans, offered through private lenders and without government backing, also have varying terms based on the loan type, lender, and other factors. To qualify for a conventional loan, small businesses typically need to meet certain requirements, including possibly providing a business plan and collateral.
There are also unconventional funding options such as invoice factoring and merchant cash advances. Prior to deciding on an SBA or conventional loan, it's important to weigh up the advantages and disadvantages of both. Tools like the SBA's lender match can be helpful in determining the most suitable loan options. Factors such as business age and credit history, the purpose of the loan, and the financial health of the business, including annual revenue and net worth, should all be taken into account.
Both SBA and conventional loans can be applied for simultaneously, as many businesses utilize several funding types to meet different objectives. Approval for an SBA loan, however, can take from 30 days to several months. Generally, SBA loans offer lower rates and better terms, but funding isn't swift. Choose a private lender for quick funding, albeit at a higher cost.