SBA Loan

With traditional lending, the same resources and costs are required to close a $50K loan as a $500K loan. Real-time lending both removes costs and increases pricing, transforming small business lending into a lucrative growth driver. 

Manual lending takes weeks of inefficient and costly front- and back-office resources. Real-time lending executes credit policies in minutes—all without sacrificing a bank’s credit standards. In addition, banks using real-time lending have proven they can increase pricing based on the convenience it offers to customers.

Digital access is now table-stakes for banks, and on-demand services are transforming every aspect of business and consumer life. Real-time lending allows businesses to secure financing online anywhere, anytime.

Millennials and GenX, the largest lifetime value segments for banks, grew up with the Internet and increasingly expect services on-demand. Real-time lending attracts these business owners, establishing a foundation as long-term customers.

Real-time lending ensures uniform credit decisioning without inconsistency or subjectivity, all while providing credit officers the flexibility to price by segment and make changes in shifting economic environments.

Real-time lending powers more than just online applications. From in-branch and over-the-phone conversations to remote visits, bankers can walk businesses through the online application process to speed loan funding to minutes.

Business lending has become increasingly crowded with alternative financing options. Local banks can offer defensible differentiation by coupling advantages in their community relationships and high satisfaction scores with real-time lending’s convenience.

SBA loans are loans issued by private lenders and backed by the U.S Federal Government’s Small Business Administration (SBA). These fixed-rate loans are designed to make it easier for small businesses and entrepreneurs to get financing.  More than 800 lenders, community development organizations, and micro-lending institutions are authorized to issue SBA loans. Under the SBA’s 7(a) loan guaranty program, the lender provides the loan and the SBA promises to pay the lender a portion of the loan if the borrower defaults.  Having government backing allows lenders to take on more risks when it comes to providing loans to small businesses. In the 2020 fiscal year, lenders issued a  combined $28 billion in SBA loans

For many businesses, an SBA loan is a way to get a lower interest rate than a regular business loan. 

There are 2 reasons for this:

• First, the government caps fixed-rate SBA loans at a certain level. 

• Second, lenders are willing to take more risks when they know the government is there to bail them out. 

Having said that, interest rates can still vary from lender to lender. Therefore, the first thing to look for when comparing SBA lenders is interest rate and small business loan APR. In addition, we recommend comparing lenders by reputation, level of customer support, and ease of application process.

• SBA 7(A)

The standard SBA 7(A) is the most common, and most versatile SBA loan. With a loan amount of up to $5 million and the widest range of uses, it can benefit any business that’s eligible. That said, it’s an especially attractive option for startups due to the combination of large capital and flexibility. 

• SBA 504

If you can pinpoint your needs specifically on new machinery or facilities, however, the SBA 504 loan is your best bet. It’s similar to the standard 7(A), with loans of up to $20 million and extended repayment terms, but it’s designed specifically for large, stationary spending. Look into the 504 if your business is in need of new land, new facilities, or expanded operations.

• SBA express loans

SBA express loans, meanwhile, get you money quicker, but less of it. The express loan drastically reduces the time it takes to receive financing (approval comes within 36 hours), making it ideal for those looking for quick turnaround. It’s best if you’re an established business with specific, time-sensitive needs, since eligibility is more difficult and new businesses might not be approved. The loan amounts cap out at $350,000, but because of their speed they’re ideal if you’re eligible and require less capital for an urgent or niche need. 

• SBA fees and sba loan rates vary by the type and amount of loan you take out, as well as market interest rates that fluctuate. The SBA rates for standard 7(A) loans range from 7.75%-10.25%, the former for loans repaid in less than 7 years and the latter for repayment that takes more than 7 years. Repayment terms expand if you use the capital to purchase new equipment (10 years) or real estate (25 years). 

• A loan guarantee is the amount the federal government has agreed to pay on the loan. It can be as high as $3.75 million, and it guarantees that in the event of deferral, the lender will still receive that amount from the government. Loan guarantees are what give private lenders the confidence to offer SBAs with lower payments and more flexible terms.   

• SBA loans typically take 60-90 days from application to receival of funds. Of course this depends on the loan type, the eligibility of the applicant, as well as other factors unique to each business. Those that require quicker access to finances can apply for an express SBA loan, which reduces approval time to 36 hours, and delivers money to the borrower’s bank account in a matter of weeks.