When looking at financing options for your small business, it is important to understand how SBA loans differ from conventional ones. Researching these loan programs can help you find the best one to apply for, gather the necessary information and work with the right lenders. The Small Business Administration has programs designed to help with commercial real estate purchases or upgrades, growth or working capital and even disaster relief.

The SBA Is Not a Lender

The Small Business Administration loan programs are not intended to give you money directly from the administration, instead, the SBA works with preferred lenders to help you guarantee the loan and to make the process less risky for the lender. Many times, you will first find a preferred lender from a list on the administration’s website and work with their loan officer to choose the right program, gather the necessary documents and apply for a loan.

Qualifying Is Easier, Process Is Longer

While the biggest benefit to SBA loans programs is that they make qualifying for financing easier than doing it on your own, they also take much longer to apply for and get approved. You can typically get a bank loan in a month or two, but some SBA programs can take several months to a year for approval. You might have to gather more documentation for some of these programs and others may have restrictions outside of your control. For example, to qualify for the disaster relief program, you do not necessarily have to own a business, but your area does need to be declared by the federal government as one affected by a disaster.

More Flexible, Longer Terms, Lower Rates

Loans through SBA programs are more flexible with payments allowing for interest-only or deferred payments if your company is going through a hardship. These loans also have longer terms than other types of business financing allowing for smaller monthly payments over ten to twenty-five years instead of higher payments over three to five years. The average interest rates for SBA loans are usually a little lower than the average traditional bank loans and much lower than non-traditional financing options.

SBA loans can be a good fit for many businesses which meet the size and time requirements. This is not lending directly from the SBA, but rather programs designed to help companies guarantee financing through a preferred lender. This makes qualifying easier than going to the bank on your own and can give you longer terms, lower interest rates and more flexible payment schedules. The process for these programs can take much longer than other financing options, but you can work with a loan officer to avoid holdups like missing documentation.