Where should you go to apply for a business loan to get the lowest rate and longest payback period? Could government loans be the solution? The answer is yes: many entrepreneurs find the solution in a government business loan from the US Small Business Administration or SBA.
This government entity provides financial assistance to small businesses through different credit programs adapted to the needs of every entrepreneur. Thus, you can access a loan to buy equipment and supplies, refinance your debts or establish a line of credit.
How do the government loans and the SBA work?
The SBA offers these government loans through banks and credit unions and is committed to cover a certain percentage of your debt in case you can’t pay it. For starters, the agency helps you prepare your loan application so you only have to take it to the bank. If the bank approves it, they send all the documentation to the SBA, which may take up to two weeks to review it.
As with any lender, you must meet certain requirements to receive financial assistance from the SBA and any of the government loans. An obvious requirement is that you have a fixed source of income that allows you to repay the loan. However, the SBA also studies the personal credit history of the applicants, their business experience, and their management abilities, and takes into account the assets and capital they hold that can serve as collateral or guarantee.
The main benefit of these government loans is that they offer emerging businesses an opportunity that usually banks deny: to receive the financing they need to grow with reasonable terms.
Most popular SBA Loans
The SBA grants financial assistance through various programs like the following:
- 7 (a) Loan Guarantee Program: it’s generally used to start or expand small businesses. It can reach up to $5 million, with payment terms up to 7 years.
- Micro-credit Program: it’s used to cover short-term financial needs, such as buying inventory or office equipment. This type of loans can reach up to $50,000.
- 504 Fixed Assets Program: they are addressed to businesses that benefit their communities with their efforts, like creating jobs in the area. These loans have a fixed rate and are designed to guarantee long-term financing. They can reach up to $5 million.
- Disaster Assistance Program: this credit program extends long-term, low-interest financing to homeowners or renters who need to restore their property and business assets when damaged by natural disasters.
The 7 (a) program is the most flexible of all and the most popular among entrepreneurs who are starting or in the process of growing their business. Below is everything you need to know about this loan:
How to get a 7 (a) loan for your company
The SBA 7 (a) program is one of the most popular small business government loans. The agency does not lend money on its own but offers guarantees to banks for loans of up to $5 million or over 75% of the total loan amount. For amounts less than $150,000, the maximum guarantee is 85% of the total loan.
SBA policies prohibit lenders from charging many of the fees usually associated with business loans. You can use a 7 (a) loan to expand your business, refinance a debt, buy equipment, inventory and even real estate. This program grants longer terms and lowers initial payments compared to other financing options.
To access this loan you need to fulfill certain requirements:
- Your business must be recognized by the SBA as a “small business”.
- The company must operate within the US.
- You must have the resources to invest in the business’ assets and show that the loan is for a solid business purpose.
- You must not have any pending debt with the US government.
Although federal loans are a great alternative for employers, applying for an SBA loan involves a lot of paperwork. These documents you may include:
- Statement of purpose: a business loan application letter.
- Business plan.
- Very specific financial documentation, about your and your business.
Applying for an SBA loan takes time and a lot of work. Remember that is you are a minority small business owner, if you are an entrepreneur woman, or if you are a veteran entrepreneur, there is a variety of alternative lenders and special resources available for you. And, luckily for any small business owner, there are still other options.
Camino Financial, a fast and reliable alternative
Traditional banks and the SBA are not the only ones that can help you fulfill your dreams as an entrepreneur. At Camino Financial we can help you finance your venture with our two loan programs:
1. Small Business Loans
There are many advantages of this loan compared to others available in the market:
- You can pay at any time without receiving additional penalties or fees.
- You don’t need a collateral.
- You receive an instant prequalification that doesn’t affect your credit score.
- Your loan can be financed as subordinated debt over an existing one.
With this service, you can access financing between $50,000 and $400,000 with an interest rate that ranges from 12.0% to 19.5%. In addition, your loan term goes from 24 to 60 months.
To benefit from a Camino Financial small business loan, you must verify that your business has been operating for at least 9 months, that it hasn’t declared bankruptcy in over the last year and that it generates at least $90,000 annually.
You must also submit some documents: bank statements for the last six months, business tax returns for the last two years, and your last year’s personal tax returns.
No matter how small your business is, Camino Financial is willing to support you with a microcredit.
- It’s similar to a line of credit since after paying for 3 months, the initial loan amount is restored.
- It’s a personalized credit model for micro businesses that handle everything in cash or that are managed informally.
- To access the loan you only need an Individual Tax Identification Number (ITIN)
With this loan, you can get between $5,000 and $50,000 for your business, with an annual interest rate between 19% and 29%. You have 24 months to repay it. Also, upon request, you will receive prequalification instantly and financing will be ready in about 5 days. You do not need a collateral.
To access a microcredit your business must generate a minimum of $30,000 in annual sales, must have operated for at least 9 months and have not declared bankruptcy over the last year.
Contact one of our loan advisors to learn more about these credit programs. You will receive personalized attention, in English or Spanish. For your convenience, you can do it through our website.
As you can see, getting a small business government loan can be difficult. If you meet the SBA requirements and have the time and patience to do the paperwork, this may be a good option to finance your venture.
But if you have a business opportunity that can not wait and you need fast financing, Camino Financial is a reliable alternative to make your business dreams come true.
Contact our loan specialists and apply today!