Pros and Cons of Financing Through SBA Loans

Posted By Kalamata Capital LLC || 28-Aug-2018

Although the community advantage program is a welcome alternative for entrepreneurs seeking local business loans, this isn’t the best funding option for every business. Let’s take a look at the benefits and the drawbacks of applying for an SBA loan:

The Pros:

  • Low interest rates: SBA community advantage loans are among the most affordable financing available.
  • Long repayment terms: Timelines stretch as long as a decade, making monthly repayments smaller and easier to manage.
  • Easier access to funding: SBA loans are still difficult to qualify for, but standards are more manageable than you’ll find with traditional bank loans.

The Cons:

  • Complex application process: Expect to be filling out a lot of forms, gathering extensive paperwork, and navigating some federal red tape to obtain approval for an SBA community advantage loan.
  • Extended approval timeline: Because loans must be approved by both your local intermediary lender and the SBA, and there’s lots of documentation involved, the SBA loan approval timeline can stretch out over weeks or even months before you have cash in hand.
  • May tie up other access to credit: In some cases, taking on this long-term loan right now could hold you back from accessing other forms of small business financing in the future.

Given these pros and cons, only you can decide whether pursuing the SBA loan application process is the right choice for your business. As you weigh your options, be sure to take into account both the short-term and the long-term needs of your small business.

Categories: Small Business, Tips, Funding, SBA, Loan