Maximizing Your Business Growth with SBA Loans and Small Business Loans

What Are SBA Loans?

Loans that are backed in part by the U.S. Small Business Administration, SBA, are called SBA loans. These loans are given through approved providers, such as banks, approved by the Small Business Administration for small businesses to have easy access to affordable financing. Because of the guarantee made available by the government, the risk of lending becomes less for lenders, making it more easy and possible for a small business owner to obtain capital, even when the individual’s credit isn’t perfect.

SBA loans differ from one another; each comes with its features and requirements. The best known is the SBA 7(a) loan. It is mainly for general purposes, such as buying equipment, refinancing debt obligations, or providing working capital. Other small business administration loans available include the CDC/504 loan, which is used mostly to buy property or large equipment, or the microloan program that disburses small loans to new enterprises.

Why Choose SBA Loans for Your Business?

SBA loans benefit most small business owners because they have many advantages. Here is their unique chance of getting affordable financing because the U.S. Small Business Administration backs these loans. Knowing the benefits of SBA lending helps you assess the needs of your business regarding whether these loans are a good fit for you. Some of the most important include:

• Lower Interest Rates: SBA loans are generally characterized by a very low interest rate, which is one of the main attractions for any potential borrowing party. Because these loans are basically federally backed, any risk on the lender’s part is negated, making sure lower interest rates for the borrower. The lower interest would benefit the lender, and in this way, the cost of the loan would not be a burden for the start-up and, therefore, focus more on repaying the loan as the business project develops. 
• Longer Repayment Terms: SBA loans come in as another lifesaver for anyone willing to carry an extended repayment schedule. SBA lending generally has extended repayment terms, which help extend the period of payment of the loan. This extended repayment will ease cash flow because the business will not honour huge payment sums in a short time that may actually throw the firm out of its monthly budget. 
• Larger Loan Amounts: If dependent on the specific type of SBA loan, these funds provide even more payoff potential than may be available in traditional streams of lending. Whether it is some major cash for expansion, hiring new personnel, or a large set of new equipment, an SBA loan can finance just about any major initiative. The good thing about this is that companies looking at heavy investment for their expansion will get that backup there. 
• Flexible Use of Funds: SBA loan opportunities are very flexible with their use. In general, these loans can be used for buying all forms of equipment, refinancing debt, or acquiring real estate. Their almost universal application means that the business can utilize the same loan for whatever need may arise in its operations, giving a supporting hand in meeting its immediate financial needs and business objectives. 
• Lower Down Payments: In comparison to conventional loans, SBA loans generally have lower down payment requirements; hence, they are more favorable to small businesses. Because of these reduced down payment requirements, a business can secure funding without having to give up a substantial chunk of its available capital right away. This can be crucial for a new company or business with severely limited reserves.

What Are Small Business Loans?

These business loans are used to help small enterprises grow. Regular banks, credit unions, or online lenders generally issue these loans for small businesses. Many varieties of small business loans can fit any need. They can be used for the purchase of equipment, operational costs, or marketing campaigns, which, in turn, means that small business loans cover most needs of a smaller business, from enabling short-term cash flows to long-range plans for expansion. 

Generally speaking, small business loans are unsecured, hence the slightly higher interest rate and shorter repayment terms. Because the government guarantees an SBA loan, there are a lot of rules in qualifying for it; therefore, they are not as flexible as small business loans. Thus, SBA lending may not be an option for business entities that require funds quickly or may not fulfill some of the strict criteria for approval under SBA loans.

Types of Small Business Loans

There are different types of small business loans, each offering a unique set of benefits. Some of the most common small business loans include:

• Term Loan: A term loan is a specific amount of money that you are expected to repay over a particular time. Most of the time a term loan will be issued at a fixed interest rate with specific payment dates. Term loans are great for organizations looking to borrow a single payment to do something specific, including but not limited to a purchase of equipment or facility size expansion for operational needs.
• Line of Credit: A business line of credit is also an option for an unsecured loan, whereby money may be borrowed as necessary. In this scenario, lending institutions better understand your risk profile and grant you a line of credit for a fixed amount, against which money may be borrowed when necessary (to service a payroll, for example, to buy inventory, or simply in case of emergencies). You pay interest only on the amount drawn from your line of credit, as opposed to the total amount of a term loan, and this can be good for cash flow management.
• Invoice Financing: If your business receives payment terms with customers, invoice financing can be an option to convert invoices into cash preceding payment. Some lenders will grant some money in hand in exchange for them receiving the accounts receivable instead of your office. In summary, you can get cash in hand to immediately fund payroll, buy inventory, or do anything else.
• Equipment Funding: Equipment funding occurs when a lender provides loans to organizations for the acquisition of either new or used equipment. The equipment acts as security, resulting in a lender who has a claim on that asset if the organization defaults on the loan. Overall, equipment financing could be a good fit for your organization if you depend on machinery, vehicles, or any physical estate property for operations.
• Merchant Cash Advance: A merchant cash advance is basically a large sum of money. When an organization gets a merchant cash advance, the loan repayment is made from a percentage of their daily credit card receipts to pay back that advance. This can be a good option for an organization that has steady daily credit card receipts but cannot qualify for a traditional loan.

How SBA Loans and Small Business Loans Differ?

While SBA loans and small business loans are both designed to help business owners access the capital they need, they differ in a few key ways:

• Eligibility Requirements: In general, qualifications for SBA loans are stricter than traditional small business loans. In order to be approved for an SBA loan, you must qualify as a small business, along with a favorable credit report and an acceptable business plan. Qualifying for small business loans is generally less strict, especially from an online lender.
• Interest Rates: Though small business administration lending typically offer lower interest rates than most other loans, small business loans from various lenders may also offer low interest rates depending on the lender and loan type. Therefore, as a business owner, it should be considered and reviewed in alignment with your financial position and overall long-term goals.
• Repayment Terms: Often, SBA loans have repayment terms that are longer, often as long as 10 or more years. A longer repayment term may give you extra breathing room as you repay the loan and lower the monthly cash burden on your business’s budget. On the other hand, small business loans and loans from different lenders have a shorter repayment term based on the lender.
• Approval Process: The time involved in underwriting an SBA loan can be lengthy due to the volume of documentation necessary to process this type of product. In some instances, certain SBA loans even have additional security requirements on the terms of that loan as part of the underwriting of that loan, which may increase the approval time. Smaller business loans through online lenders can be approved and funded quicker, as they require less documentation, which is also appealing for individuals who need working capital quickly.

The Role of Term Loans in Business Growth

One of the most recognized lending products for small business owners is term loans. Term loans provide businesses with an upfront lump sum of cash that is paid back at a fixed monthly payment over time (usually at a fixed interest rate, also). Small businesses can utilize term loans for many different reasons, including some inventory, purchasing equipment, purchasing real estate, or any other business plans etc. The most important upside to a term loan is that the business has access to a lot of a large amount of cash immediately. This can benefit your business if your goal is to fund an investment for your future all at once. Term loans will usually come with a fixed rate, so you have a set monthly payment, which allows for much better financial planning.

How SBA Loans, Small Business Loans, and Term Loans Can Power Your Business Growth

Now that you’ve learned about the difference between SBA loans, small business loans, and term loans, you may be interested in how these loans affect your business growth. Let’s find out about some of the ways these loans can help achieve your business goals.

• Expanding Fund: Whether you are starting a new location, creating a new product, or entering new market segments, you are likely going to need to access capital to support that growth. Financing options are several, such as the SBA Loan or Small Business Loan, which help fund development, while better protecting your cash flow.
• Equipment Financing: A business’s equipment can include anything from equipment, vehicles, or computers, but in many situations, the equipment is a central part of the business income. If you take a Term Loan or Small Business Loan, you really want to determine the right equipment to finance that won’t stretch your cash flow, which can have an impact on productivity and efficiency.
• Improving Cash Flow: Regardless of what type of business you’re running, cash flow is a key player. SBA loans, small business loans, term loans – those can help bring in that cash flow you might need to handle monthly obligations (payroll, rent, or inventory – however, whatever size company you have, it helps keep you going when cash flow is not plentiful or you need that extra cash.)
• Hiring and Training Employees: As your business grows, you may need to add employees to keep up with increased capacity needs. A SBA loan or small business loan may help with the support to cover the hiring, training, or onboarding expenses to have the necessary workers in place to grow.
• Refinancing Debt: If you are in too much debt with the current loans you are working with, an SBA loan or small business loan may help to combine and pay off existing loans or debt and better manage payments and cash flow.

How Small Biz Heroes Can Help

We understand the unique challenges you face as a small business owner when looking to fulfill your funding needs. The entire process can be stressful and overwhelming, especially with so many loan products and different requirements in front of you. Whether you are a brand-new business needing start-up funds or an established business searching for growth options, the need for sustainable financing remains constant.  We focus on assisting clients of all types with reaching their financial goals through the secured or unsecured SBA loans, small business loans, or term loans you might need. Our knowledgeable staff will assist you in understanding the loan options that are available to you and will work with you to help determine the right loan for your needs so you can move forward with your business knowledge and confidence.

Our advisors are experts who seek to simplify what can seem like an overwhelming process. We first become familiar with your business’s financial position, financial goals, and challenges, and only then will we offer potential loan options. Small Biz Heroes provides more than one way to receive a loan; you receive guidance to help navigate the complexities of business financing. Our goal is to make the application process as easy as we can so you can focus on operating and building your business. Once the funding is completed, your business can have the working capital you need to overcome barriers to continue to pursue opportunities and grow your business to its next level of success.

Conclusion

SBA loans, small business loans, and term loans are all valuable and effective ways to secure the funding needed for your business growth and success. Whether you’re trying to grow your business, buy equipment, or have short-term business expenses or a short-term need, all of these financing options should provide you with funding to fill your business needs. These loans do have very different benefits, so it is crucial to understand why they are different to understand which loan type will be best for you. If you make the right choice of loan type it will give you confidence you have set your business up in a way that addresses both your short-term objectives and long-term objectives.

At Small Biz Heroes, we strive to help small business owners get the funding they need to move forward and accomplish their goals. Our professionals will partner with you to analyze your business needs and identify the best financing option for your unique business situation. We will help you get funding, whether it is for expanding your business, financing equipment, or working capital. We will lend our support every step of the way, supporting you from loan options to loan applications and approvals! Contact us today to discuss what options exist for you and how we can further help you accomplish your business goals! The more we can help you, the more successful you will be in your business role and your business growth!