Landing a Small Business Loan: The Least You Need to Know, Part 2

Ron Box, in the Journal of Accountancy, writes that the small business loans generally and the SBA loan program specifically offer many different means of accommodating a small business’ specific financial parameters. “For many businesses, the benefits of an SBA-guaranteed loan include having access to capital where traditional commercial loans may not be available,” he writes. “Startups and young businesses without a sustained history of financial performance may find an SBA-guaranteed loan especially attractive. For businesses with cash flow issues, an SBA loan can restructure debt at better terms by providing longer loan maturities and lower payments. Businesses without sufficient collateral to obtain a traditional commercial loan may find an SBA loan particularly useful.” SBA loans are not without their drawbacks, however.” If the federal government is willing to guarantee a substantial portion of a company’s debt at favorable terms, why choose traditional commercial lending over an SBA loan? In general, an SBA loan requires more information than a commercial alternative and more time. Also, there is a perception of complexity in maneuvering through the various SBA loan programs. …Also consider that some businesses are ineligible by definition for SBA loans. Nonprofit organizations, lenders, passive businesses (developers and landlords that do not actively use or occupy the assets acquired with SBA loan proceeds), life insurance companies, and private clubs that limit membership are examples of ineligible businesses. Additionally, SBA loans can require guarantee fees that do not apply to conventional commercial loans. Depending on the amount borrowed, these fees can be significant.”

Street Directory explains, “When starting a new company or business, people may sometimes to get some financial assistance in the form of small business loans. Some current business owners or people who are interested in starting a small business are not familiar with or have never heard of small business loans. Small business loans are loan agreements between a lender and a borrower, usually the business owner, in which the borrower agrees to pay back the borrowed amount of money plus interest. The size of the loan will vary from company to company and also from lender to lender. There are certain lending companies that are willing to give out more money than others. There are several advantages to having small business loans. The money received from small business loans is an extra resource that can be used in any sector of the business where needed. These loans are usually flexible and with the assistance of a financial advisor can be set up in such a way that best benefits the borrower or company owner. Small business loans can be used for a variety of things… Small business loans are not without their disadvantages however. The loan itself will have to be paid back with the interest. This will be agreed upon at the initial borrowing date. However, if you are starting a new company and the company does not profit the way you had expected you might be stuck with a loan payment every month that you cannot make. This is the risk you take. Also by taking out a small business loan, in the end you will pay back almost twice as much money as you borrowed due to the fact that you have to pay back the interest as well. This is something that you should consider before getting a small business loan.”

According to Business Bogs, “Every business needs a certain amount of money to start. The entrepreneur on the threshold of starting a new venture, has to work out where and how he will get access to sufficient funds. The first organization that he thinks of is his bank. Yes banks are almost always one of the first organizations to be approached for funds in the form of a loan. It is here that harsh realities hit the entrepreneur who soon learns how difficult it is to get a bank loan to finance his small business venture. A select fortunate few, do manage to fulfill all the pre-requisites for a bank loan, and are successful in procuring them. But for every successful loan application there are many that get rejected. The tough regulations linked to bank loans are gradually undergoing a change with banks realizing the phenomenal potential of small businesses. This explains the special programs and additional services launched by big banks to woo small businesses. Bank loans are just one of the various options available for small businesses to raise funds. The final decision about where to secure funds depends on the balance between the pros and cons of the source. Like all other funding sources, bank loans also come with their share of advantages and disadvantages.”

It’s true that a small business loan is cumbersome and requires applicants to meet a long list of prerequisites. If collateral is offered to secure the loan, that collateral could be lost in the event of a default. And the bank may not grant the entire amount of the small business loan application. That application process, too, can be very involved and can take a very long time to wend its way through to completion. A small business loan, however, offers lower rates of interest than some alternative means of financing, may offer certain tax benefits, and is convenient and accessible if your business qualifies. Let Infiniti Funding handle your small business loan. Contact us today for information.

Related Post