SBA Loans Sioux City IA

U.S. Small Business Association (SBA) loans can be a great opportunity for entrepreneurs to finance small businesses. However, these loans may prove more difficult to get than many applicants think. Borrowers planning to apply for SBA loans should plan in advance for the potential hurdles that lie in store.

SBA loans are not distributed directly by the SBA; they are provided by commercial lenders. The SBA guarantees a portion of the amount to the lender in case of borrower default. This encourages lenders to provide financial assistance to small business owners whom they might not normally fund. The SBA offers three different loan programs for small businesses. The first is a basic 7(a) loan program, which is the option most applicants will likely seek and which can be used for “most sound business purposes,” according to the SBA website. They also offer a certified development company 504 loan program, which provides financing for real estate and equipment to allow small businesses to expand and modernize. The third option is a microloan which provides short-term financing for amounts below $35,000.

Interest rates on SBA loans are tied to the prime rate. The SBA sets a maximum rate, but the final rate is decided upon during negotiations between the lender and the borrower. Lenders can be located via a searchable database on the SBA’s website or by contacting a local district office. It’s also worth noting that “a requirement for getting an SBA loan [through a specific bank] is you have to commit to doing all of your banking for your business at that bank. So if that matters to you, then choose wisely,” Katherine Swanberg, a mortgage consultant with First National Home Mortgage and owner of a Sport Clips franchise in the Seattle area, said.

Those interested in pursuing SBA funding should realize that the process can sometimes be long and difficult.

The application process can require several months to complete The turnaround time for SBA loans is generally between one and five business days, according to Peggy FaJohn, an SBA public information officer. However, “a common misconception on the part of loan applicants is that SBA’s turnaround time is the total time it takes to get a loan, when in fact it includes the time the applicant will work with the lender in discussing their loan proposal and providing documentation the lender needs to make his or her decision,” FaJohn said.

Swanberg and her business partner found the application process to be extensive, taking approximately four to five months from the time of application until the funds were released to them. Swanberg said she had believed that a typical loan should take between 60 and 90 days to process. The long turnaround time could be partially because her loan request was for a new business venture rather than an existing business.

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