The ability to secure low cost funds is an advantage established businesses have over younger enterprises. New business owners often have to rely on high cost loans, borrowing from friends and family or giving equity to investors. If you’re running an established business, here are the best financing options.
In the world of business lending, 2+ years in business is considered “established”. Existing businesses with a proven track record are seen as a lower risk to lenders.
Existing business owners should explore low cost loans before turning to expensive alternatives like credit cards, merchant cash advances or lines of credit. Here are some of the best options.
If you’ve been in business 2+ years, have a healthy credit score and strong cash flow, the SBA’s low-cost loan programs can be your best option. SBA loans are known as the “gold standard” with low rates, long terms and very low monthly payments.
There are three types of SBA loan programs available for small business owners. The 7(a) loan program, the CDC/504 loan program and the microloan program are options available for existing businesses. The SBA doesn’t make the loans; they guarantee a portion of the funds, making SBA loans more attractive to lenders.
SBA 7(a) loans can help a business grow and save money. Here are ways you can use funds to grow your business and save.
For in-depth information about the popular SBA 7(a) loan program, review our comprehensive article: What is an SBA Loan?
SBA 7(a) loans have several advantages compared to other options including:
Read why SBA loans are so popular on the SmartBiz website here.
Lenders and loan programs have unique eligibility requirements for an SBA loan. For example, some lenders may require a business plan while others do not.
Requirements for an SBA loan facilitated by SmartBiz include:
Step 1: Check your eligibility. Before you even begin your application, make sure your business is eligible. Visit the SBA website for a list of eligible businesses. You must also meet the requirements listed above.
Step 2: Review requirements and gather paperwork. The more organized you are, the swifter the application process will move. For a list of documents required for an SBA loan, visit the SmartBiz Blog. How to Get an SBA Loan: Documents You Need
Step 3: Choose a lender. Although SmartBiz Loans is not a lender, we work with multiple banks to match you with the lender most likely to fund. You won’t waste time going from bank to bank. This video has step-by-step information about how to get an SBA loan:
This program was created to give small businesses low cost funds for expansion or modernization. Typically, up to 50% of project costs are funded by a lender backed by the SBA. CDCs (Community Development Corporations) usually fund up to 40% of the project cost. The final 10% is a cash down payment expected to come from the small business owner.
A 504 SBA loan might be a good fit for small business owners interested in purchasing a commercial real estate property. To find your local CDC, visit the SBA website here.
The Microloan Program is for very small businesses and provides loans of up to $50,000. Requirements to qualify for a microloan can vary depending on the lender. Proceeds from an SBA Microloan can be used for most business expenses but not for paying down debt or real estate purchases.
Low-cost SBA loans have some of the lowest interest rates and lowest monthly payments available. However, not every business owner initially qualifies and some businesses need funds more quickly than the SBA application process can provide.
SmartBiz Loans worked with our bank partners to offer clients the next best loan option – a bank term loan. Because SmartBiz has multiple banks on its platform, customers are matched with the bank most likely to fund. This drives up approval ratings and business owners won’t waste time going from bank to bank.
Non-SBA loans are term loans meant to be repaid in a shorter amount of time than the 10-year term of a typical SBA loan. This type of loan can be a great way to get the funds you need to grow or maintain your business until you are ready for an SBA loan.
SmartBiz currently offers non-SBA loans through its bank partners. Here are the details:
Ready to apply for an SBA loan? Discover if you’re prequalified in minutes without impacting your credit score here.
If you’re not quite ready for an SBA loan, our loan experts will help you explore other options.