Reliable Funding for Uncertain Times

Reliable Funding for Uncertain Times

How SBA loans fuel growth for small business owners.

TCB Insights logoProjections for economic growth in the U.S. look grim for 2023, thanks to high interest rates, rising unemployment, and falling inflation. Helping small businesses succeed has been at the core of the U.S. Small Business Administration (SBA)’s mission since its inception in 1953. As the nation’s champion for small businesses, SBA can secure trustworthy funding to help business owners and entrepreneurs grow, expand, or recover. Local financial experts explain the benefits.

Meghan Hormann
SBA Group Sales Manager, Senior Vice President, Old National Bank

Entrepreneurship is synonymous with uncertainty, and SBA loans can provide needed stability. Every small business has different needs. Here are some beneficial features of SBA lending:

Lower down payment 

Meghan Hormann

In most cases, the SBA requires a minimum down payment of 10% of project costs. The low down payment requirement allows business owners to preserve cash for working capital and other needs. It also allows business owners to pursue projects, such as purchasing a property, which might otherwise be unattainable.

Longer loan amortization 

One key feature of SBA lending is the ability to stretch out loan amortization and reduce the monthly loan payment. With a lower payment and limited prepayment penalties, SBA lending offers small business owners the benefit of flexibility during the inevitably challenging months.

No balloon payments 

SBA 7(a) loans are fully amortized loans with no balloon payments. By eliminating balloon payments, and the resulting uneasiness, the owner can focus on running their business into the future.

Lending with a collateral shortfall  

SBA 7(a) loans don’t require full collateral coverage—if all available collateral has been pledged—which allows more businesses to obtain a loan without assets to pledge.

Tom EthenTom Ethen
Vice President, Commercial Lending, Stearns Bank

Whether you’re just starting out or you’re a seasoned entrepreneur, investing in your business is a constant need, even during economic uncertainty.

In a more unpredictable economy, other types of financing tools can become more limited and restrictive while SBA loans remain flexible, convenient, easy to understand, and are beneficial for businesses on many levels.

An SBA loan can foster growth in a variety of ways. They are used to purchase inventory, acquire another business, construct a building, get working capital, and much more.

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In any economic climate, SBA loans bring peace of mind and are highly beneficial. For example, they are fully amortizing loans with no balloon payments. That means you don’t have to worry about requalifying, paying additional fees, or renewing your loan. Fee waivers or other savings options can also help make SBA loans more affordable than many other options.

Change is inevitable but business owners always impress me as smart risk-takers who adapt well and do what it takes to overcome challenges—an SBA loan is simply a great vehicle to reach success.

3 Types of SBA-guaranteed loans

7(a) loans. The most common SBA loan program, 7(a) loans offer up to $5 million in funding to help small businesses refinance debt and purchase furniture, fixtures, and supplies, with caps on interest rates and limits on fees.

504 loans. This type of loan, available through community-based partners (Certified Development Companies, or CDCs), offers long-term, fixed-rate financing for up to $5.5 million. Loans can be used for major projects such as purchasing or repairing real estate, equipment, and/or machinery.

Microloans. This smaller loan program offers $50,000 or less to help businesses start up and expand.