Government-backed SBA loans help businesses with financing opportunities for a number of different purposes. These loans are however notorious for their lengthy application periods, which can take up to several months. Loan amounts go as high as $5 million, with competitive interest rates and repayment terms from between 10 and 25 years. Most SBA loan programs also require a 20% down payment on the loan so that you’re heavily invested in the success of the business.
There are several different types of SBA loans to consider. A 7(a) loan is the most common one and the funds can be used for general business purposes. SBA 504 loans are used to purchase a specific asset, like a real estate or equipment. The application process varies depending on the lender. A traditional financial institution, like a bank, may have a longer review process compared to an online lender.
Also known as a commercial mortgage, these loans are designed to purchase a property, such as an office building, retail store, warehouse etc. Loan amounts are typically large and the term length is up to 30 years to make payments more affordable. These loans can also be used to refinance the terms of an
existing commercial mortgage or renovate a property you already own.
Rather than giving your business a one-time injection of capital, a business line of credit gives you access to credit when you need it over a period of one to two years. You can draw on your credit line as needed and only pay interest on the balance, rather than the entire available amount. A LOC is an ideal type of commercial financing in a number of scenarios. Such as for financial emergencies, to help cover
ongoing expenses, like payroll, especially if your revenue is seasonal or inconsistent . A big advantage is it gives you agility to act on opportunities as they arise, without having to apply and wait for financing in the future.
These loans can be a great way to manage and grow your company. Some of the primary benefits of using a commercial loan are:
Access to capital: When your business’ current cash flow is not enough to get through slow periods or you need to ramp up for busy seasons, or you need access to the capital for the short-term.
Faster growth: Taking on debt is something that many businesses often do to accelerate growth and/or take advantage of new opportunities to expand. Another way to use a business loan is to raise funds for your company, and avoid taking on external investors, thereby retaining full ownership of your company.