SBA Loans Overview

An SBA loan is a government-guaranteed small business loan that has a long-term and a low-interest rate. The Small Business Administration (SBA) is the government agency that partially guarantees SBA loans and was founded in 1953 to support small business owners across the United States.

The most common misunderstanding about these loans is that the agency lends money directly to small businesses. However, the agency typically does not make direct loans. The SBA provides a guarantee on the loan, promising to reimburse the bank for a certain percentage of your loan if you default on that loan. This guarantee lowers the risks to banks and other lenders, encouraging them to offer these loans to more American small businesses. Many banks and other financial institutions offer SBA loans, but their process, requirements, and fees can vary.

SBA 7(a) loans from $50,000 – $500,000 from banks in the SmartBiz network can be used for debt refinancing and working capital. Working capital includes operational expenses, marketing, hiring, etc. SBA loans can be used to fund new equipment purchases as well.

SBA 7(a) loans can also be used for refinancing existing business debt not secured by real estate (such as cash advances, business loans, and equipment leases).

The SBA also provided up to $10 million in Paycheck Protection Program (PPP) Loans as a result of the CARES Act. These PPP loans were offered to help eligible small businesses struggling during the COVID-19 pandemic to keep employees on the payroll. Funds from these loans could be used to cover payroll costs, employee benefits, rent, utilities, and other approved costs. If these funds were used as designated, the loan could be forgiven. This program was supposed to end on June 30th, 2020, but is in the process to be extended to August 8, 2020. SmartBiz processed thousands of these PPP loans on behalf of the banks in our network.

In the not-so-distant past, small business owners had one option when looking to apply for an SBA loan—walking into a bank. However, many businesses might not know that while one bank may say 'no', another bank will say 'yes' to the same potential borrower. Technology can now help small businesses find an SBA loan provider online that is a good fit. In fact, SmartBiz has created the first online network of Preferred SBA lenders for small businesses. With multiple banks with varying credit requirements on our platform, we've been able to help many applicants successfully apply for an SBA loan who were initially rejected by their local banks. What's our secret? It's no mystery; our sophisticated software allows us to match borrowers with the lender most likely to approve and fund their loan. Rather than spending your time going from bank to bank, SmartBiz can help you successfully apply for a loan quickly and efficiently.

How much is an SBA loan going to cost you? The news here is positive—it's tough to beat the low interest rates and long repayment terms for these loans. SBA loans tend to be the least expensive financing available to small business owners.

SBA loans come with different rates depending on the lender you work with; however, the SBA establishes the maximum amount that can be charged for these loans. For Debt Refinancing and working capital loans, this is a Variable rate of Prime rate plus 2.75% to 6.5% depending on the size of the loan.

As with other types of small business loans, there are several fees associated with SBA working capital loans offered through SmartBiz. The SBA does not require you to hire a referral or packaging agent to secure an SBA loan.