Every business thrives (and survives) on working capital. The need for an infusion of cash may include an expansion of the business, hiring more employees, purchasing more inventory, updating some equipment, paying for a marketing campaign, taking care of some unexpected expenses or bridging a seasonal change in cash flow. When more funds are needed for any of these purposes (or others) it may be time to get a loan. Financing options include traditional bank loans or SBA loans.

The Difference Between Traditional Loans and SBA Loans

Both Small Business Administration (SBA) and traditional or conventional loans are issued by banks or online lending institutions. SBA loans come from banks that participate in the SBA loan guaranty program which pays back 50 to 85% of the loan to the bank if the business happens to default on the loan. Often when businesses seek financing, they seek a conventional loan that is not backed by the government, but which may be faster and somewhat easier to obtain than an SBA loan.  However, SBA loans have these significant advantages versus conventional loans:

  • Lower interest rates. SBA loan rates vary based on the type of SBA loan that is obtained, how much is borrowed, and the repayment terms selected. 
  • Longer repayment terms. Many conventional loans offer repayment terms of up to five years while SBA loans can offer terms of up to 25 years. 
  • Lower or no collateral requirements, thus minimizing personal risk to the borrower. 
  • Higher loan amounts. 
  • Increased spending flexibility. SBA loans can be used for many operating expenses except for paying taxes.  

SBA Loan Myths

Common myths about SBA loans are:

  • Not borrower friendly. 
  • The lending process is slow and inefficient. 
  • The SBA lends money directly to small business owners.  

Seek Expert Financing Assistance

Contact the financial experts at Sudden Rivers Capital Corp in Atlanta, GA, known for having diverse and flexible commercial finance services.  Our financial professionals can help you secure appropriate funding to meet your business’s financial needs.