01 Aug Everything You Need to Know about SBA Economic Injury Disaster Loans and Some Things You Didnt Even Know to Ask

SBA loans come with some of the strictest underwriting requirements small business owners can face. At a minimum, the SBA typically requires a credit score of 680+, along with strong personal and business financial histories, and no less than 2 years in business. SBA loans for real estate, for example, typically come with 25 year repayment terms, while terms are shorter—typically 7-10 years—for purposes other than purchasing real estate. SBA loans offer small business owners a number of advantages, including lower rates, favorable repayment terms, larger loan amounts, and forgivable COVID-19 support. Bank loan may be more difficult to qualify for, it will generally offer the most competitive rates and terms.

Are guaranteed by the Small Business Administration and offered through partner lenders such as traditional banks, community banks and credit unions. Programs for business funding include SBA 7 loans, SBA 504 loans and SBA Microloans. Some businesses receive funds in just a few days, and a credit check isn’t always required.

The cons of SBA loans

The SBA, in partnership with lenders, created guidelines with the aim of aiding small business expansion and growth. Unlike traditional bank loans, SBA loans are aimed specifically at SMBs. With few exceptions, we favored lenders offering a variety of funding options and higher-than-average loan amounts.

• Virtually any SBA loan can be used to fund business expansion, but the SBA 7 and CDC 504 loan programs are the two types of loans most commonly used for that purpose.
• The reader is required to seek professional counsel before beginning any legal or financial endeavor.
• Keeping up with business costs during COVID-19 isn’t easy, especially when you’ve got loans due.
• While small business owners often use SBA disaster loans, you don’t have to own a business to qualify for one.
• In 2020, during the COVID crisis, the Paycheck Protection Program was created under the SBA 7 loan program.

The SBA states that applicants must have acceptable credit for approval. One of the best ways to ensure your chosen financing vehicle is right for you, is to understand all of your available options. Here are some popular ways entrepreneurs are financing their businesses and how they compare to SBA loans. This wide range provides you the buying power and flexibility you need as a business owner to launch the project of your dreams. Additionally, your loan’s rates and terms can be affected by the type of disaster you’ve experienced.

Summary of Money’s Best Small Business Loans of 2023

This is another kind of loan available to businesses from the SBA following a disaster. An EID loan isn’t meant to help repair facilities, replace inventory, or upgrade your physical location. This working capital loan will help you pay employees, utilities, and more. You can expect to make a 10% to 20% down payment to secure an SBA loan, in most cases. Lenders are more likely to work with borrowers who are willing to invest equity in their business.

At the end of the loan term, investors get their full contribution back and can choose to withdraw the funds from the Kiva account or reinvest in other businesses on the platform. Another important consideration is that OnDeck requires customers to sign a personal guarantee and agree to a blanket lien on their business assets. This means you would be liable to repay your business’ debts if your company defaults on the loan. When an SBA Loan Officer offers a loan amount, you can ask for less or reject the loan entirely. If the business still hasn’t recovered and the initial loan has been exhausted, it may seek additional funding without completing another loan application. There is no blank on the application where a business would enter a loan request amount.

Disadvantages of SBA Loans

People often confuse the Economic Injury Disaster Loan alongside the Economic Injury Disaster Loan Advance program, but they’re two different financial solutions. The Economic Injury Disaster Loan is currently available, but the Advance program was put on hold on July 11, 2020. However, the government is still processing applications for the Advance program as of mid-July 2020, and additional funding has not been approved at this time. Guidant Financial takes an educational and transparent approach to small business and franchise financing. Our team of financing experts will help you understand your funding options and develop a personalized solution tailored to your businesses needs. We invest in your long-term success so you can create the life you want.

But for business funding specifically it typically refers to credit card financing. Approval for this type of unsecured loan is based solely on your credit score, with a minimum of 690 required for loan approval. Depending on your credit score, you can borrow up to $150,000 in https://kelleysbookkeeping.com/ small business financing. However, it’s only a savvy option for those who can repay the loan quickly because after one year the interest rates go from zero to 14 percent or higher. You don’t need to know all the ins and outs of the SBA loan program to apply for an SBA loan.