More business owners are looking to borrow capital today than in recent years. There are many reasons for this: to provide better training and development for employees; to invest in new equipment or to expand operations; and to enhance health benefits and improve salaries, among others.


What is a Small Business Administration (SBA) loan?


The SBA is a government agency dedicated to small business growth. The organization offers several loan programs for a wide variety of needs and company types, but the SBA does not directly lend money; they partner with banks, community development organizations and micro-lending institutions and set guidelines for how those lenders can structure loans. Each type of SBA loan is unique and involves parameters and stipulations not necessarily offered in other SBA loans. These conditions often revolve around how the money can be used and the terms under which it should be repaid. The details of the program are constantly changing, so the more familiar your banker is with SBA loans, the simpler the process could be for you.


There are two types of lenders that handle SBA loans:

  1. SBA standard lender – this qualified lender must submit transactions for review and receive a guarantee upon approval for every loan.
  2. SBA preferred lender – this lender is the more qualified of the two types. Loan approval times can be reduced because the SBA checks only the lender’s justification of eligibility for the borrower, not their underwriting. Bank of America is an SBA Preferred Lender.


SBA Loan Advantages:

  1. Guaranteed by the government. If the loan is defaulted or unpaid, the lender can ask the government to honor the loan. This reduces the risk to the lender, allowing it to extend credit to borrowers it might otherwise decline.
  2. Favorable terms. Because of the government guarantee, lenders may be able to provide loans with more favorable terms than a conventional loan.
  3. More time to pay. Repayment terms are longer than traditional loans, extended to up to 10 and even up to 25 years in some cases. Plus, on loan terms of less than 15 years, there is no prepayment penalty.
  4. Affordability. SBA loans often require lower down payments, which allows the borrower to preserve the cash they need to operate the business.


Things to be aware of:

  1. Complex Process. Due to the government’s involvement, the application process may be more document-intensive and could possibly include extra fees not found in traditional loans.
  2. Lengthier Approval. The time it takes to get approved or denied can be much longer than with a conventional loan.
    • Applying for an SBA loan can be time consuming. Fortunately, the SBA has a Preferred Lenders Program (PLP) that’s designed to simplify and expedite the loan-approval process.


Learn more about Small Business Administration Loans from Bank of America.1


1All programs subject to credit approval and loan amounts are subject to creditworthiness. Some restrictions may apply. The term, amount, interest rate and repayment schedule for your loan, and any product features, including interest rate locks, may vary depending on your creditworthiness and on the type, amount and collateral for your loan. Bank of America may prohibit use of an account to pay off or pay down another Bank of America account. Repayment structure, prepayment options and early payoff are all subject to product availability and credit approval. Other restrictions may apply.

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