Because of the popularity of SBA loans, a great many misconceptions have cropped up over the years about how they’re administered, who’s eligible, how loans must be repaid, and more.
Some of the most common misunderstandings and myths regarding SBA loans are considered below.
People with bad credit should apply for SBA loans
The fact is, an SBA loan guarantee will help a would-be business owner overcome some financial challenges, but not bad credit.
Successful businesses don’t need SBA loans
An SBA loan can actually be very helpful, even for successful business. It can provide increased cash flow and allow for lower down payments on business equipment.
SBA loans don’t have to be paid back
These are not loans from the government, and they are in fact arranged through traditional lending institutions. Both the SBA and the lending institution involved will expect repayment of any loan.
The SBA is a huge money lender
The SBA itself does not in fact lend out any money – it merely guarantees a portion of the loan through a traditional lending institution. The fact that at least part of the loan is backed by the government will increase your chances of being approved by the bank.
An SBA loan involves mountains of red tape
While there certainly can be a great amount of documentation and paperwork involved with an SBA loan, an experienced lender will be able to handle most of it for you.
Any small business will qualify for an SBA loan
First of all, the SBA has a fairly strict definition of what constitutes a small business, and some industries are completely excluded from eligibility. A good SBA lender will be able to tell you whether or not you qualify for a loan.
No collateral need be involved
Any lender extending an SBA loan to a business owner will be required to seek collateral for the loan, and may even require a blanket lien on all assets.
SBA loans involve lots of fees and high interest rates
The SBA itself only charges a guarantee fee, and it limits the interest amount the lender may charge. However, a lender is free to charge packaging fees which are independent of the SBA.
Business loans with Black Wolf Capital Group
Virtually all small businesses will require an infusion of capital at some point, and when your business is in that situation, consider contacting Black Wolf Capital Group. We may be able to help provide the financial assistance you need, and we are always available to explore options with you.