What is an SBA Loan?
You might have heard SBA loans are the gold standard for small business owners who want to expand. It’s true. Funds from these loans can be used in a multitude of ways to help a small business grow.
What exactly is an SBA loan? We’ll go over the costs, qualifications, use of proceeds and more to help you determine if this type of loan is the best option to fund your small business.
SBA Loans: The Basics
An SBA loan is a government-guaranteed small business loan that has a long-term and low-interest rates. The Small Business Administration (SBA) is the government agency that partially guarantees SBA loans and was founded in 1953 to support small business owners across the United States.
The most common misunderstanding about these loans is that the agency lends money directly to small businesses. However, the agency does not make direct loans. The SBA provides a guarantee on the loan, promising to reimburse the bank for a certain percentage of your loan if you default on that loan. This guarantee lowers the risks to banks and other lenders, encouraging them to offer these loans to more American small businesses. Many banks and other financial institutions offer SBA loans, but their process, requirements and fees can vary.
Where Can I Apply for an SBA Loan?
In the not-so-distant past, small business owners had one option when looking to secure an SBA loan—walking into a bank. However, many businesses might not know that while one bank may say ‘no’, another bank will say ‘yes’ to the same potential borrower. Technology now gives loan-seekers the ability to find an SBA loan provider online that is a good fit. In fact, TheBizCash has created the first online marketplace of Preferred SBA lenders for small businesses. With multiple banks with varying credit requirements on our platform, we’ve been able to secure loans for many applicants who were initially rejected by their local banks. What’s our secret? It’s no mystery; our sophisticated software allows us to match borrowers with the bank most likely to approve and fund their loan. Don’t waste your time going from bank to bank. TheBizCash does it for you quickly and efficiently.
What SBA Loans Cost
Now for the good stuff: How much is an SBA loan going to cost you? The news here is positive—it’s tough to beat the low interest rates and long repayment terms for these loans. SBA loans tend to be the least expensive financing available to small business owners.
SBA loans come with different rates depending on the lender you work with; however, the SBA establishes the maximum amount that can be charged for these loans. TheBizCash SBA loan interest rates are variable and depend on the loan amount:
As with other types of small business loans, there are several fees associated with TheBizCash SBA working capital loans. TheBizCash charges a one-time referral fee of no more than 2% the loan amount and a one-time packaging fee of no more than 2% the loan amount for non-commercial real estate loans. For loans up to $150,000, the SBA charges a guarantee fee of 2% of the guaranteed portion OR 1.7% of the loan balance. Exception: For 7(a) loans in an eligible Rural Area or HUBZone the guarantee fee is reduced by about 67%. For loans of $150,001 to $700,000, the SBA guarantee fee is 3% of the guaranteed portion OR 2.25% of loan balance. For loans of $700,001 to $5,000,000: 3.5% of the guaranteed portion up to $1,000,000 plus 3.75% of the guaranteed portion over $1,000,000. Bank closing costs for working capital loans typically add about another $450 and include standard bank fees, though additional 3rd party report charges may apply. TheBizCash fees are deducted from loan proceeds so you get the net amount when your SBA loan is funded.
For commercial real estate loans, TheBizCash charges no more than a one-time 0.5% referral fee of the loan amount and no more than a one-time 0.5% packaging fee of the loan amount. Commercial real estate loans have a guarantee fee paid to the SBA between 2.25% and 2.76%, depending on the loan amount. Bank closing costs typically add about another $5,000 and include standard bank fees, appraisal, and title fees though additional 3rd party report charges may apply. TheBizCash fees are usually deducted from loan proceeds so you get the net amount when your loan is funded.
Even after fees, SBA loans are vastly cheaper than the majority of alternative financing and alternative lender options. See below how these loans stack up against other small business loan options.
Compare & Save
Better rates and lower monthly payments
|Cash Advance Providers||Peer to Peer Lenders|
(including interest rate and fees)
|20% – 100%||9% – 36%||7.43% – 11.04%|
|FUNDING PROCESS||1 – 7 days||7 – 14 days||as fast as 7 days|
|LOAN TERM||< 1 year||1 – 5 years||10 – 25 years|
|TYPICAL PAYMENT FOR A $100,000 LOAN||$12,000 per month
(daily payments required)
|$5,000 per month||$1,227 per month|
Personal and Business Requirements to Apply for an SBA Loan
TheBizCash SBA loans are for financially healthy borrowers. Most businesses can qualify for these loans if they’ve operated for at least two years with good credit, have no recent bankruptcies or foreclosures, and have cash flow that is sufficient to make the monthly payments throughout the life of the loan. The actual approval requirements will depend on the on the individual lender and factors such as your business revenue, cash flow and credit scores.