The Small Business Administration (SBA) is an independent agency of the federal government designed to counsel, assist and protect the interests of small businesses. They offer a wide range of services, from assisting in the direction of your small business plan to linking you with lenders for small business loans. Through an extensive network of field offices and partnerships with public and private organizations, the SBA delivers their services to business owners throughout the United States, Puerto Rico, U.S. Virgin Islands and Guam. Most notably, they provide a few different types of loans for small businesses which are unable to secure financing on reasonable terms from traditional institutions, such as banks. They do not directly lend their own funds to small businesses, but rather, operate through a series of lenders that are guaranteed by the SBA.

            The SBA puts forth many different loan variations, each with its own pros and cons. Some of the cons of SBA loans include potentially high interest rates on smaller loans, though actual rates will depend on the lender. Generally, the lower the sum of the loan, the higher the interest rate will be. Another pitfall is the minimal loan amounts. To most business owners the options are limited to several hundred thousand (though exceptions do exist) while the largest SBA loan can go up to $2,000,000. Though rarely does the SBA extend this amount. Finally, SBA loans can be very difficult to acquire. Hefty bureaucracy and paperwork requirements are both complex and time consuming.

            Sometimes, advantages of SBA loans make it worth the wait. A definite plus is that they are usually made available to most traditional industries. Also, although the interest rates have a high ceiling, it is rarely reached. Other pro-business terms include that the SBA not allow banks to charge commitment or prepayment fees on loans under 15 years.

            All in all, small business loan amounts and interest rates are a fluid entity and tend to change frequently depending on where the small business loan is established and on the state of the economy. These changes can be both large and small, and depending on whether you have a fixed or variable interest rate, can benefit or harm your finances.

StrongBusinessCredit motivates small business owners, new and old, to explore alternative financing through corporate credit-building models; however, this does not exclude the use of SBA and bank offered loans. Each business situation is unique and we encounter new combinations of circumstances pointing in different directions every single day. In some instances, an SBA loan may become more lucrative for a business model. We often come across counterexamples to our own principals and teachings; the beauty of business is that it is an everyday learning experience—and should be for you, too.