What’s the Difference Between SBA Loans and Conventional Loans?

When it comes to business financing, there are a lot of options available. Generally business owners end up torn between SBA loans and conventional loans. While neither is necessarily better than the other, there are advantages and disadvantages to both. Here is what sets an SBA loan apart from a conventional loan.

 

An SBA Loan Is Complex

 

In contrast with a conventional loan, an SBA loan has a long list of regulations and processes to abide by. Simply put, there is a lot more paperwork involved. The process also takes a little longer than a traditional loan. In fact, it can take from 90 to 120 days. These are not quick loans, but they do have sustainable funding with favorable rates.

 

An SBA Loan Has Longer Terms

 

One of the advantages of SBA loans is the rates. The rates are lower than a traditional loan, not to mention, the terms tend to be longer. These longer terms mean that you pay less each month. With smaller installments, you can focus more money into your business than paying off your loan.

 

An SBA Loan Offers More Flexibility

 

If your business ever experiences a financial hardship or if you end up falling behind on any of your payments, there are flexible options to help you. The SBA loan may let you defer payments or only have you pay interest for a certain amount of time. This is different from a conventional loan. With banks, you generally do not have a choice or any options when it comes to flexible payments.

 

An SBA Loan Is Easier to Qualify For

 

Conventional lenders usually have a lot more requirements for you to follow than an SBA loan. This is one of the biggest benefits when it comes to applying for this type of financing. There are great options for new businesses or a business that has limited collateral. In fact, most businesses are never denied because they don’t have collateral. This is very different from conventional loans. Now, it will want to use all of the available collateral that you have.

 

When it comes to SBA loans, they tend to be beneficial for businesses of all sizes. While conventional loans can be great, there are a lot of advantages to an SBA loan that are hard to deny. If you are looking to expand your business or need a larger loan, then an SBA loan might be best.

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