What Can You Use An SBA Loan For? Let’s Learn More
SBA loans or Small Business Administration loans are an option for small businesses that need financing. A government agency backs these business loans, and you can use them for many purposes. SBA loans are federal small business loans that local banks administer throughout most of America. Over 70 different uses exist for these types of loans, and you can take advantage to achieve your financial goals. Here are some services of SBA loans.
- Making House Down Payments
If you’re buying a home, an SBA loan can assist with your down payment. It will help you avoid upfront costs like mortgage insurance and PMI. If you plan on purchasing a $300,000 home, for example, that 6% will cost you around $18,000 in fees. That’s not chump change! You save yourself thousands of dollars by using an SBA loan to pay off your down payment. It’s a great way to get into your dream home without cash.
An SBA loan compares with other Types of Business Loans in terms of approval requirements, but there are some differences in the use of these loans. Because the government backs these funds, lenders have more flexibility in approving them for different applications than traditional bank loans. One significant difference between an SBA loan and a conventional mortgage is that you don’t need 20 percent down to qualify for an SBA-backed mortgage; many lenders require as little as 5 percent down payment when using these funds.
- Buying a New Business Building
The SBA provides business loans for almost any type of business, and SBA-backed mortgages are available for most real estate purchases, including buying a new house. While purchasing a home is one of life’s most significant milestones, it’s also one of its most daunting financial undertakings. Thankfully, you can use an SBA loan to make your dream come true.
When applying for an SBA mortgage, work with a lender with experience with business and residential financing. It will ensure that they know what they’re doing—and help prevent any missteps that could derail your plans. An experienced lender will be able to guide you through all stages of applying for an SBA mortgage, from securing preapproval through closing on your home purchase.
- Sole Proprietor Business Expansion
If you’re currently running a business as a sole proprietor and want to expand your operation, you may be able to get a low-interest SBA loan for your next project. These loans are typically for small businesses. If you plan to invest more than $150,000 in equipment or new inventory, you may need to look into a traditional business loan.
Remember that getting approval for an SBA loan is based on your credit score and overall financial health—not necessarily how good of a business idea you have. SBA loan is ideal for financing smaller projects because they don’t require a large down payment or equity stake from you. It is easier to get started on your expansion without selling off other assets (like stocks).
- SBA Loans Can Help You Meet Your Business Tax and Insurance Obligations
One of the most common uses for an SBA loan is to cover tax and insurance obligations that your business can’t afford on its own. These obligations are both required by law and critical to keeping your business out of legal trouble.
If you do not pay your taxes or property insurance, you could face stiff penalties—not to mention a severe blow to your reputation as a business owner. Fortunately, SBA loans can help you meet these obligations before they become severe problems.
- Initial Debt Relief Assistance
If you’re just getting started or have an existing business, you may be in a difficult financial situation. One way to get relief from your current debts is by using a Small Business Administration (SBA) loan to pay off some of your debt. SBA can pay up to six months of debt relief assistance on loans guaranteed by a lender. It is an excellent way for small businesses in financial distress to catch their breath and get back on their feet.
It’s also an excellent way for lenders to recover some of their losses when borrowers default. If you qualify, you may be able to get paid twice: once from your lender and again from SBA. If you think you might need debt relief assistance, contact your lender immediately—the sooner they know about your situation, the sooner they can work with you on getting it approved.
- Recover Your Damaged Home After a Disaster
Natural disasters can cause extensive damage to homes, from floods to wildfires and tornadoes to hurricanes. If you require help repairing your damaged house after a disaster, look into SBA disaster loans. The SBA loans are specifically suitable for people who need help recovering from a tragedy that has destroyed or damaged their homes or property. Contact an experienced loan expert today for more information about how you can use SBA loans to help recover your damaged home after a disaster.
Conclusion
SBA loans are a powerful financing tool with many applications. If you’re looking to start or grow your business, an SBA loan might be what you need to make it happen. If you’re thinking about applying for an SBA loan, contact your reliable local lender and find out how they can help you secure funding for your business. The first step is always the hardest, but that first step gets much easier when you have a reliable partner. And if you have any questions about what kind of business financing options are available to you, reach out more about SBA loans and other types of business lending solutions today!
