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Are you a small business owner looking for suitable funding options? Do you think you can be eligible for SBA small business loans? If you have not yet explored these loan options, it is time to do some research. 

SBA small business loans exist in order to give small business owners more access to financing. They are partially guaranteed by the government and can be used for any purpose. Furthermore, the SBA loans also have flexible terms and rates of interest, which mainly attracts potential borrowers. The SBA schemes allow private lenders to offer loans and the lenders get guarantees from the government to mitigate their loss risk. The lenders then provide loans to small businesses that otherwise will not qualify for the loan amount due to their credit history or other factors. 

Why are SBA loans the best choice?

One of the prominent benefits for lenders and borrowers is that SBA loans are backed by the government and offer a range of loan terms. These terms include loan repayment tenure, repayment terms, interest rates, loan sizes, and much more. In addition, SBA loans do not restrict you from using the money for a specific purpose, and the loan amount can be used for any legal business needs. 

What are the qualifications for getting an SBA loan?

Generally, the qualification criteria for any business loan vary from lender to lender. However, every lender analyzes whether your business will adequately service the SBA loan or not. The borrowers and their business are evaluated on the consistency of cash flow and case-by-case basis. Here are some following criteria for availing SBA loans:

  • Business should be operational for at least two years
  • The credit score must be 620 o above
  • The annual revenue of the business must be more than $100,000 

The lenders look for the borrower’s credit history to analyze if they have been responsible buyers in the past or not. During the initiation of the application process, the borrowers are typically required to submit an outline of the business plan along with a financial history of the business. Some of these document proofs include:

  • Personal tax returns
  • Business tax returns
  • Bank statements
  • Profit and loss statements
  • Balance sheet

There can be an increase or decrease in the number of documents you are required to submit on the basis of the SBA business loan you have applied for. 

What type of businesses are readily eligible for?

Although the SBA loans are not industry-oriented, some types of businesses tend to get more funding on an annual basis. Here are those common business types which can get funded readily through government-backed SBA loans:

  • Restaurants
  • Gas stations
  • Convenience stores(grocery stores)
  • Medical offices
  • General contractors
  • Logistics

As discussed earlier, the SBA scheme helps business owners to avail loans across a wide range of fields. The major business types which are preferred over others are the ones that play a significant role in the economy. 

THE FINAL WORDS 

The SBA small business loans are government-backed loans offered by private lenders. These loans are mainly provided to startup businesses with a sound business plan and adequate cash flow coverage. Their business productivity should be efficiently reflected through projection to qualify for SBA loans. SBA loans help small businesses to regulate their cash flow in the initial years. Some aspects like credit score, business revenues, the tenure since which the business has been operational are considered to declare a business eligible. Therefore, ensure to work in the industry for at least two years, build a jaw-dropping portfolio, and maintain a decent credit score before opting for SBA small business loans.

By saif