Is an SBA Loan Right for Your Business?
Some of our nation’s largest and most successful companies once relied on Small Business Administration (SBA) lending to fuel their success. So have countless others since the SBA’s creation in 1953 by President Eisenhower.
But how do SBA loans stack up with other borrowing options?
A lot depends on factors like how long you’ve been in business, the urgency of your funding needs, and your need for custom finance terms developed by specialists in your equipment and industry.
Loan Size
Documentation
Approval Timeframe
Guarantees
Interest Rates
Required Credit Score
Fees
Collateral Requirements
Term
Prepayment Penalties
SBA
Bank
Equipment Finance Companies
Up to $5 million
Substantial documentation required, including all financials (business and personal), business plans, resumes, and more
45-60 days
Business and personal; SBA may guarantee up to 85% of the loan; personal assets are frequently at risk
Low to moderate
Fair to good
Guarantee fee; while often included in the loan amount, this fee is a one-time payment to compensate the SBA for its partial guarantee of the loan; the fee can range from 1 to 5% of the loan amount depending on the lender
Lower and more flexible; uses of funds can reach far beyond equipment and be used as working capital or for business acquisition
10 years
Often
Rarely
Up to 5 years
Higher and may require down payment
Low to no fees; generally less than $500
Good to great
Lowest
Business and personal
10-30 days
Full documentation of all financials (business and personal)
No maximum
Rarely
Up to 10 years
Lower and more flexible because of lender asset specialties
Low to no fees; generally less than $500
Fair to good
Low to moderate
Business only or Business and personal
1-10 days
Often application-only up to certain limits, with full financial documentation above those limits
No maximum
If you’re considering an SBA loan, here’s a quick look at some of the benefits, as well as some of the drawbacks, compared to other funding sources.
SBA Loan Advantages vs. Disadvantages
For companies in business a relatively short time and in need of the added flexibility that can come with a partial government guarantee, the SBA can be a useful capital alternative, as long as you’re comfortable with approval times, guarantee fees, and funding limits.
Advantages
For established businesses with regular equipment needs, the complexity of SBA lending can weigh heavily against the benefits it offers, while the speed and flexibility of other options can make them better choices.
Disadvantages
Get Help Making the Right Choice for You
Considering new or used equipment for your business? To discuss funding options and explore which may work best with your equipment needs, competitive environment, and growth goals, contact us today.
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Terms and Conditions: All applications are subject to credit approval. LEAF finances equipment only for business purposes and not for personal, family, or household use.
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SBA
Bank
Equipment
Finance Companies
Rarely
Up to 5 years
Higher and may require down payment
Low to no fees; generally less than $500
Good to great
Lowest
Business and personal
10-30 days
Full documentation of all financials (business and personal)
No maximum
Prepayment Penalties
Term
Collateral Requirements
Fees
Required Credit Score
Interest Rates
Guarantees
Approval Timeframe
Documentation
Loan Size
SBA
Bank
Equipment
Finance Companies
Rarely
Up to 10 years
Lower and more flexible because of lender asset specialties
Low to no fees; generally less than $500
Fair to good
Low to moderate
Business only or Business and personal
1-10 days
Often application-only up to certain limits, with full financial documentation above those limits
No maximum
Prepayment Penalties
Term
Collateral Requirements
Fees
Required Credit Score
Interest Rates
Guarantees
Approval Timeframe
Documentation
Loan Size
Equipment Finance Companies
Bank
SBA
SBA
Bank
Equipment
Finance Companies
Bank