Chances are, if you’re in business for yourself or have ever considered starting a business, you’ve heard all about the infamous Small Business Administration Loans and wondered exactly what they are and which type you should apply for.
Hence, we’ve provided you with the following brief explanation to help you understand some of the most popular types of SBA loans, so you can get started finding the right one for you.
What Are the Different Types of SBA Loans?
An SBA 7(a) loan is one of the most preferred types of loans due to the many advantages it provides business owners, including flexible use of the loan, a repayment term of up to 25 years, and low-interest rates, provided you meet the requirements.
It can also be used by both new and seasoned companies for purchasing equipment and other general purposes associated with running a business.
However, the loan amounts only range from $5,000 to $5 million, so it is usually best for small and medium-sized businesses that are not quite yet fully established.
CAPLine Line of Credit
An SBA CAPLine is generally combined with a 7(a) loan as a line of credit rather than a standalone loan to help qualified businesses maintain their cashflows during off-seasons and more.
There are also 4 different lines of credit available, which are based on your specific industry.
Business owners that meet the requirements can apply for up to $5 million in credit with a loan repayment term of up to 10 years.
However, in most cases, they also have to put up collateral for the CAPLine.
SBA Disaster Loans are to help businesses with losses incurred from natural disasters; however, they can also apply to economic recession.
Applicants can qualify for up to $2 million in funds for repairs, replacement, operating expenses, and more, and they may also be given up to 30 years to repay the loan.
However, they first have to prove their business was economically or physically affected by an earthquake, flood, or another natural disaster under the SBA’s definition.
You can also apply for multiple loans in different subcategories as long as you prove they are warranted.
This loan type is also designed so that businesses in need of help won’t be overburdened with debt.
An Express Loan is a swift approved loan that enables small businesses to finance up to $350,000, provided they meet the requirements. However, it may take up to a month to receive your funds.
Ultimately, no matter which SBA loan type you choose, according to Lantern by SoFi, ” part of considering small business loans and other financing options for your company is knowing how much you’ll pay in interest over the term of the loan.”
Therefore, you should be sure to check current SBA 7a loan rates and more before applying. Otherwise, it can end up costing you way more than what you borrowed once the APR is factored in.