Are you a small business owner or have plans to start a small business? Perhaps you need funding to get your business at the level you need it to be. An SBA lending bank could help you acquire the capital you need. The following are a few points to understand about SBA loans. 


SBA loans are issued by lending institutions. Some individuals mistakenly think that since they are referred to as SBA loans that the Small Business Administration provides the loans. The governmental agency actually serves as a guarantor if an unfortunate incident such as a defaulted loan occurs. 


There are a number things that business owners can apply for SBA loans to cover. The nature of the loan will impact the terms of the loan. If your business has debt that you want to consolidate, you could even apply for an SBA loan to refinance the debt.

Fees and Interest

There are a few fees that may be associated with acquiring an SBA loan. Examples of fees are appraisals or credit reports. Some fees may be waived based on certain factors regarding the loan, which will vary between applicants. You will have to pay interest on the loan. This could be a fixed low-interest SBA loan but many lenders use the Prime Rate, which is a variable rate. 

Benefits to Lenders

Approving SBA loans allows lenders to have a more robust portfolio. It allows them to provide loans to businesses that may not qualify for traditional loans due to being considered high risk. They have the assurance from the SBA that the money will be paid back even if the business owners cannot do so.

Benefits to Borrowers

If a down payment is required, it may be lower than a traditional commercial loan. You may also not be required to have collateral as part of the approval process. The loan term may be longer, which can mean lower payments that can help businesses "stay afloat" if they face financial issues in the future. 

Approvals or Denials

The process of applying for an SBA loan can take longer than a traditional loan due to government guaranty being involved. You can expect to complete paperwork, and you may have to provide proof of things listed on the loan application such as income. You may also encounter an issue where you are approved but given funds in installments rather than all at once. For example, some lenders provide portions of loans based on invoices provided. It is also possible that you might be able to negotiate a loan for a lesser amount if the bank does not want to extend the amount you request.