Important Updates to SBA Loans

by | May 9, 2022 | SBA | 0 comments

The SBA has been busy. With a series of loans issued over the past couple of years in light of the pandemic and what they have been doing to help small businesses throughout this challenging time, the organization is trying to find even more ways to make SBA loans accessible. In one of their latest updates, the US small business administration is modifying business size standards in 16 industrial classification sectors. This move effectively extends eligibility for certain SBA loans, namely federal contracting loans and loan programs that would impact nearly 60,000 businesses.

According to an SBA spokesman, “the publication of these final rules will make 59,000 additional firms eligible for millions of dollars in revenue and business expansion opportunities.” The SBA has taken into account not only current economic conditions but also such things as supply chain issues and labor shortages as they seek to find additional ways to help struggling small businesses.

Those industries and sectors not impacted by these new rules will maintain current size standards in terms of SBA eligibility. But for those 16 sectors where there will be an increase in size standards, this means that now some midsize businesses will be eligible for SBA loans where previously they had not been.

Why Apply for an SBA Loan?

First off, let’s look at what an SBA loan entails. SBA loans can range from $500 to $5.5 million. They can fund anything related to your business, including inventory purchases, equipment purchases, and working capital. The SBA has several loan programs for which small businesses in the United States might apply. The 7(a) loan program is their flagship product. You can borrow up to $5 million to cover relevant business purposes with this loan. There’s also the 504 loan program. The SBA will partner with a certified development company to offer funds for certain fixed assets in this program.

The SBA serves as a guarantor for the loan with an SBA loan. That is to say, if a company should default, the SBA will secure the funds up to 90% in most cases. This makes it less risky for the lender, and that, in turn, helps make the loan application a bit more attractive.

Benefits of SBA Loans

1. If you have previously been denied a business loan, you may qualify for an SBA loan. The SBA secures the loan up to a certain percentage, thus increasing your approval rate on your application. So, for example, if you have already been to lenders and have been turned down, you can apply for an SBA loan.

2. The interest rates tend to be more attractive. The interest rates are also capped. Because of this feature, SBA loans tend to be more competitive as businesses want to take advantage of the favorable interest rates.

3. They offer a broad range of resources to small business owners. SBA centers across the country are generally on hand to help small business owners with various issues. They offer classes and seminars. They also sometimes will provide business plan writing help. Maximizing the resource centers and their resources is undoubtedly in your best interest.

Some Cons of SBA Loans

1. If the business defaults, you are personally liable. With most SBA loan products, the business owner or owners serve as guarantors. If the business cannot repay the loan, this means that your assets are at stake.

2. Many require collateral or a deposit. Given how the SBA loan programs work, many funding options will need you to put down some deposit or have collateral to secure the loan.

3. The process can be slow-moving. In the instance of an SBA loan, both the lender and the SBA itself are essentially evaluating your application. The entire process can take a long time. So you want to keep that in mind.

First Union Lending Wants to Help

We offer small businesses the help they need during this challenging period. Our loan programs are fast and flexible. You are not waiting weeks or months for the funds to hit your account. Most of our clients will get funded within 2 to 3 business days. And even if your credit score is less than ideal, we might still have a financing option for you. Contact us today.

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Only U.S.-Based Businesses are Eligible