Funding is one of the entrepreneurs' most significant challenges when launching a business. In other words, where will the money come from to ensure a company has a chance to succeed?
Entrepreneurs, therefore, must be well-versed in what options they have to secure financing for their businesses.
And one of those options is an SBA loan.
What is an SBA Loan?
An SBA loan is a source of financing in which a private lender issues a loan backed by the U.S. federal government to a small business to help cover various startup costs and other financial needs.[1]
Typically, SBA loans are issued by banks that benefit from the U.S. Small Business Association’s partial guarantee to cover the risk if an investor defaults on the loan.
Specifically designed for small businesses, SBA loans feature stringent lending standards but offer flexibility in options to make them one of the best ways to fund a business.
What Can SBA Loans Be Used For?
SBA loans can be used for many different purposes in the startup or operation of a small business. Various types of SBA loans exist, with the best option varying based on what the entrepreneur plans to use the funding for.
SBA loans can be used for working capital, expansion, long-term assets, real estate, supplies, and equipment purchases, normal business purposes, or repairs.
However, the uses will be confined to those prescribed for each type of SBA loan.
Who Can Benefit from SBA Loans?
Small business owners and entrepreneurs may benefit from SBA loans, but the criteria to qualify for such funding is tight. To qualify for an SBA loan, the applicant must demonstrate:
A for-profit business operating in the U.S.;
The business owner must have invested equity, such as their own time and money, into the business;
The business owner must be able to demonstrate a need for financing and show the business purpose for which the funds will be used;
The loan must be for a small business as defined by the SBA. [1]
What are the Pros and Cons of SBA Loans?
SBA loans are one of the leading funding sources for small businesses based on their many advantages. SBA loans offer competitive rates, have relatively low fees, offer longer terms for repayment, and can offer large loan amounts to benefit small businesses.
On the other hand, SBA loans have some drawbacks that business owners must consider. For example, these loans are not easy to qualify for, are often funded slowly, and require an unlimited personal guarantee from any investor with at least a 20 percent stake in the business.
How Visa Business Plans Can Help You
Here at Visa Business Plans, our team has helped thousands of entrepreneurs start successful businesses in the U.S. We understand the significant challenges of financing an operation and know that these decisions play an essential role in your business’s success.
If you need a business plan as part of your application for an SBA loans, give us a call. Our experienced team is here to help.
[1] https://www.nerdwallet.com/article/small-business/small-business-loans-sba-loans
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The information provided in this blog is intended solely for informational purposes. While we strive to offer accurate and up-to-date content, it should not be considered legal advice. Immigration laws and regulations are subject to change, and individual circumstances can vary widely. For personalized guidance and legal advice regarding your specific immigration situation, we strongly recommend consulting with a qualified immigration attorney who can provide you with tailored assistance and ensure compliance with current laws and regulations.
Visa Business Plans is led by Marco Scanu, a certified coach from the University of Miami with a globally-based practice coaching Fortune 1000 company executives, entrepreneurs, as well as professionals in four different continents. Mr. Scanu advises clients on turnaround strategies and crisis management.
Mr. Scanu received a bachelor’s degree in Business Administration (Cum Laude) from the University of Florida and an MBA in Management from Bocconi University in Milan, Italy. Mr. Scanu was also a Visiting Scholar at Michigan State University under the prestigious H. Humphrey Fellowship (Fulbright program) with a focus on Entrepreneurship, Venture Capital, and high-growth enterprises.
At present, Mr. Scanu is the managing partner and CEO at Visa Business Plans, a Miami-based boutique consulting firm providing attorneys and investors with business planning services in the areas of U.S. and Canadian immigration, SBA loans, and others.
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