What is an SBA Loan? Types, Terms, and How to Apply

what is an SBA loan


what is an SBA loan
If you manage a small business, you’ll constantly need money to keep your company running properly. There are many circumstances in which many owners cannot afford to keep up with their expenses. Many owners who need some money to keep their company afloat take out loans. One type of loan that owners took advantage of over the past two years during Covid was the SBA or Small Business Administration loans. We’ll go through what SBA loans are and what other options are available to help your small business receive quick funds to cover expenses.

What is an SBA Loan?

An SBA loan is designed for small companies part of the US Small Business Administration. Private lenders like banks issue these loans, but the federal government is ultimately responsible for the finances if someone cannot pay off their loan. Applicants must meet specific requirements to attain this type of loan. For example, every member who owns at least 20% of that company must guarantee that the funds will be paid back. This involves ensuring one’s property and assets if a payment cannot be made. There are various types of SBA loans, and which you will apply for depends on your needs. There are loans for working capital, expansion, equipment purchases, inventory, damage repair, etc.

How to Apply

To apply, you must apply through the lender, a bank, or a credit union. There are a couple of steps you may need to take to apply. First, your company must be eligible, so ensure that all necessary requirements are met. Next, you need to find a lender through which you want to apply and then provide all the required application documents. During Covid, a specific SBA loan termed an Economic Injury Disaster Loan was used to help fill in the gaps of loss of revenue during the pandemic. The application deadline has already passed, and they are no longer available. However, companies still have to pay for expenses like inventory, rent or mortgage payments, startup costs, insurance, etc. If you’re still in need of cash and may not meet the qualifications for a standard SBA loan, a great alternative is a cash advance.

What is a Cash Advance?

A cash advance is a short-term loan issued by your credit card company. There are several ways to obtain one. You can go to an ATM and use your credit card PIN or go to your bank in person and ask for a cash advance. You can also go to a bank that offers convenience checks. Convenience checks are simple and easy since you can write to yourself and withdraw from your account.

Benefits to Cash Advance

A significant advantage of obtaining funds with a cash advance is that earning money is quick and straightforward. Obtaining one is also helpful if your small business needs funds such as renovating, payroll, upgrading equipment, purchasing a new POS system, ad source marketing, etc. Another benefit is not going through a third party to obtain the money and get it directly from your credit card company. You also do not have to apply or meet specific requirements to get a cash advance, as you do with SBA loans. Thus, allowing you to obtain funds easily. You can also get the funds instantly instead of waiting several months for an SBA loan. If SBA loans prove to be too complicated, try out a cash advance to get the funds you need now for your small business.

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