All Financial Education

What Is an SBA Loan? How Can I Get One for My Business?

June 17, 2019

Two woman holding an open sign in front of a store.

Are you looking for a loan for your small business? The Small Business Administration has programs for qualifying small-business owners that might make securing a loan a lot easier. Small Business Administration (SBA) Loans are business loans guaranteed, to the lender, by the Small Business Administration. With multiple SBA funding programs, this government agency provides SBA Loan guarantees of up to 85% of the loan amount provided through an SBA-approved lender. Idaho Central Credit Union is proud to offer SBA Loans and is an SBA Preferred Lender.

The SBA 7(a) Loan is particularly fitting. While the SBA 504 Loan focuses on real estate and construction needs, the SBA 7(a) Loan serves many different needs for most for-profit businesses. So why is the SBA 7(a) Loan one of the best out there?

Loan limit
The SBA 7(a) Loan has a maximum loan limit of $5,000,000. Unlike some other loans, the generous loan amount makes it great for many business needs. Here’s a list of some of things an SBA 7(a) Loan can do:

  • Buy equipment
  • Purchase new land (including construction costs)
  • Repair existing capital
  • Purchase or expand an existing business
  • Refinance existing debt
  • Purchase machinery, furniture, fixtures, supplies or materials

Based on use of proceeds, not collateral
The SBA 7(a) Loan is perfect for newer businesses as well as businesses that might have little history. The SBA 7(a) Loan’s term is based on use of proceeds and not collateral. Meaning, you don’t need a long history or a lot of collateral to get the loan.

Comparable rates
With all the perks, the SBA 7(a) Loan still has comparable rates compared to conventional loans. The maximum interest rates are established by the Small Business Administration (SBA). The rate can also be fixed or variable. The SBA 7(a) Loan offers flexible, longer terms and potentially lower down payments compared to other financing options. There are also specialized programs for individuals interested in exporting, those located in underserved communities, members of the military community, and small business owners looking to meet their short-term and cyclical working capital needs. Because of the comparable rates, SBA Loans have become a favorite for many businesses across different industries.

No prepayment penalty
One of the best perks of SBA Loans is there is no prepayment penalty. Businesses like to borrow when they need it, and sometimes they are able to have the expected return sooner. For example, a business gets an SBA 7(a) Loan for the demanding need to buy more inventory. They sell all of their products within a year instead of 10 years, so they are able to pay off their SBA Loan without penalty.

At Idaho Central Credit Union, we have a wide variety of services to offer our business members. From business checking accounts, savings accounts, Certificates of Deposit (CDs), to loans and lines of credit, we understand what it takes to run a business. The SBA 7(a) Loan is a great resource for businesses’ lending needs. Whether you are ready to grow your inventory, buy another business, or buy brand new equipment, the SBA 7(a) Loan can help you reach your goal. Contact an SBA Loan expert today to take your business to the next level.