business loan

How suitable is an SBA loan for your Small Business?

That depends on how easily you can access an SBA loan. Taking an SBA loan has always been the preferred choice for small business owners. They know it’s a less risk option and the interest rates are manageable. This is a program backed by the U.S government. It is being approached by every one of those small business owners, who are out there managing their business operations in the aggressive market.

Look into the statistics from SBA, 2017. It says over the past six years, the small businesses accounted for 63% of the total share jobs. Contradictorily, you have other data that throws a different picture about small businesses. The U.S. Bureau of Labor Statistics gave a report that about 50% of small business fail in the first four years.

So why do they fail?

Actually, there a lot of reasons, but the root cause is not having a good cash reserve. It’s understood that not every businessman starts with a large cash bag. But when he does want to raise capital, it matters how successful he’ll be or how quickly he can get the cash.   

Speaking about a small business loan, the federal agency has designed this program for the betterment of small business owners, but with heavy regulations.

The term ‘suitable’ here is not emphasizing about giving an option to small business owners. It’s another way of saying how easily a small business owner can approach it.

SBA Loan Eligibility Requirements, do you fit in?

It’s a startup journey with too many financial obligations. So does taking an SBA loan really a good thought? Of course, but you should take a look at these once.

They look at your Cash Flow

SCENARIO I:

You are facing a severe cash crunch. It’s so bad that you are looking for finances to run your everyday business operations. You have taken too many loans and you’re still paying. Now you are looking for additional loans.

SCENARIO II:

Your debt to equity ratio is good and till now, every loan you have taken, you have paid on time. The cash flow is positive and you are planning to expand your operations that will guarantee more revenue.

Out of the two scenarios, the SBA program backs the one that is safe and promising.It depends where you stand and how suitable you’ll find approaching a bank loan.

They Check your Credit Score

A loan can make your business life easier, but only when you have it. It’s said that if you want to qualify an SBA loan, your credit score should fall in the range of 700-800.Anything less than that, let’s say a credit score below 620, you’ll have a hard time getting a loan.

Do you have something to Pledge?

Accepted, you are a start-up, it’s obvious you didn’t have sufficient time to build your credit score or make enough money.  Even without qualifying these two criterions you’ll get a loan.(Note that I have not said you’ll qualify)

Just pledge your property or equipment or anything that would adequately cover your loan and you’ll have your money. But do you have anything to pledge?

Why is SBA Loan an Unsuitable Option?

Funding through a bank is a dream for a small business owner. This is not an affirmative sentence. But for a small business owner, who has just started up his business, chances of qualifying an SBA loan is very bleak, but there are some possibilities.

Also, nobody other than a small business owner can understand the value of time. Your time is your money and money is your life.You spend your precious time going after a small business loan and you’ll be just losing your energy missing all the opportunities.

It’s easier to get a loan from a bank when you are qualifying all the pre-requisites; otherwise, it’s just a waste of approach.

But, you can always go for these other options……

If the big banks have declined your loan application, then you can always go for online lenders. They will provide you with cash as your business needs financing. The loan lending factors may differ, but you don’t have to get worked up thinking about having a good report card.

Normally, you’ll find the terms reasonable and easy to qualify for a loan. Getting a loan fast, you can meet your business financing needs without high risks.

 

 

 

 

 

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