Q: What kind of loan will grow with my business?
Compared to typical business loans which have 3 to 10 year terms, SBA loans are backed by the Small Business Administration and can have terms of up to 25 years, says Meghan Hormann, Senior Vice President and SBA Group Sales Manager for Old National Bank. SBA loans can be used for virtually everything—from start-up costs to ongoing operations expenses, investments, debt restructuring, expansion, or as a way to weather inflation.

Q: Do all SBA loans have 25 year terms?
The reason for your SBA loan will determine the maximum term. According to the SBA’s Standard Operating Procedures, if the loan is for equipment, working capital or inventory, the term is 10 years. If the loan is for real estate, the term is 25 years. Lenders do have discretion to modify the loan if you’re taking it out for combined purposes, says Hormann. Speaking for Old National, if you’re buying a business that includes real estate and you’ll also be using the funds to purchase equipment, we could potentially finance the loan over 15 or 17 years.

Q: Can I apply for an SBA loan with any bank?
The SBA’s Lender Match program can connect you to the right lender, says Hormann. Alternatively, ask other business owners who they used, or a trusted advisor like your CPA or attorney. It’s critical to develop a positive relationship with an experienced lender, says Hormann. After all, this will likely be one of the largest and most important transactions you’ll make in your lifetime. You should always feel comfortable and in good hands with an SBA industry expert.

Q: Will I be penalized for repaying an SBA loan early?
If the SBA loan term is less than 15 years, there is no prepayment penalty. Even with low interest rates, financing costs can be significant over a long-term loan, so it makes sense to pay down your principal balance when you can, says Hormann. For SBA loans with terms exceeding 15 years, a prepayment penalty is triggered if you voluntarily prepay 25 percent or more of the outstanding balance within the first three years. After three years, there are no prepayment penalties whatsoever. The ability to prepay long-term loans after three years without penalties is fantastic, and is unique to SBA loans, says Hormann. Most customers wish they could accelerate payments, and this gives them peace of mind. It’s comforting.

Q: Besides longer terms, what other benefi ts are there to SBA loans?
In most cases, the minimum down payment will be just 10 percent, which broadens your opportunities. For most business loans, banks typically require enough collateral to support the full amount, which can be a major challenge. The SBA Guaranty backs lending on a collateral shortfall, making an SBA loan more attainable without significant assets. In addition, the ability to lock in a low interest rate for the life of your loan eliminates uncertainty, making long-term projections easier. Finally, there are no balloon payments. You won’t have
to worry about a big debt coming due, then refinancing at a potentially much higher rate.

Want to know more about SBA loans? Recognized as a Top Preferred Lender by the SBA, Old National Bank can work with you to fi nd solutions to help your business grow.