It’s time to grow your business. A government business loan from the Small Business Administration (SBA) can be the best option to get the funds you need to build a better future for your company, as long as you meet the requirements. The SBA is a platform that can help you get the capital: this organization does not lend you directly, but puts you in touch with lenders willing to listen to a good deal, so both parties can benefit. SBA loans have the lowest interest rates in the market, which make them affordable and therefore a very attractive option. But they are also hard to get. Do you meet the requirements for an SBA loan? Is this a good option for you? Let’s help you decide.
Your case may be very similar to Pablo’s. Pablo Torres is the proud owner of Torres Pan y Café, a thriving coffee shop and bakery specializing in Mexican cakes, sweets, and treats. Pablo started with a small bakery: after being operating his business for over two years and building a solid credit score, Pablo had the opportunity to purchase the vacant commercial space next to his bakery to expand his own business. This was a great opportunity: Pablo was planning to add a sitting area for customers where they could enjoy a cup of coffee and stay for a while. But unfortunately, he lacked the funds to make such a large investment. He tried to apply for a loan in different banks with no success: he met all the requirements, but most lenders are reluctant to extend financing for real estate purposes, as this was the case. But Pablo was determined to get the funds he needed. He prepared a detailed business plan reflecting the amount required, the indented use of the money and the potential benefits. His solid credit history positioned him as a responsible person. Given the case, he would be able to put up collateral: his own equipment and bakery. The healthy financial statements of his bakery were also on his side. To sump up, he met all the requirements to ask for SBA loan. The Loan Program 7 (a) extends financing that can be used to buy real estate, as opposed to most business loans. Pablo proceeded to submit his application. The downside is that he had to wait longer than expected to receive the funds. Getting great terms and conditions has a price: in this case, long waiting time and a complicated process. Luckily, Pablo was in no hurry: there were no other serious offers for the space he intended to buy. Once Pablo finally got the funds, he proceeded to buy the space and work improving and conditioning the establishment to turn it into an extension of the bakery: an attractive and inviting coffee shop.
Is your case similar to Pablo’s? If so, these are a few things about SBA loans you should know:
- Interest rates range from 4 to 8% per year
- There are several types of loans (like the 7 (a) discussed here), and you will have to choose the one that best suits your needs.
- SBA loans require that your business is based and operates in the U.S, that is properly registered and has been operating for at least two years with proven profits. Also, you must have a minimum credit score of 680 and you may be required to provide collateral. Finally, you need to show proof that you have tried, without success, to obtain a loan through other forms of financing.
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