Debunking 8 Myths Around SBA Loans
SBA loans are built to be accessible and useful for a variety of small businesses, but unfortunately the programs are underutilized because of misconceptions about the program. To get you started understanding the Small Business Administration, let’s dismiss eight of the most common myths that follow these loan applications like a bad smell.
The first two are the most basic. Number one is the idea that healthy companies don’t need loans from the SBA. This is just false. These loans are designed for healthy companies, to help them by providing a low cost path to financing that allows you to reach a return on your investment more easily. That leads us to the second common misconception, and that is that these loans are built for companies with bad credit. That’s simply not true. The SBA uses many indicators of financial health to find companies that are likely to succeed with the help of SBA loans. That does mean credit scores play a smaller role than they might otherwise, but they do play a role, and the better your credit, the better your chances of getting a loan.
Myths around the accessibility of the loans also persist. Some entrepreneurs think these loans come with egregious amounts of paperwork because of the rumors that persist. While you do need to demonstrate your company’s financial health and ability to contribute to the local economy, this should be covered in any competent business plan for small business loans of any variety. A myth persists about the length of time it takes to get determinations, too, and that one neglects to note the various ways the Small Business Administration has sped up the process over the last decade.
That’s half. The next two are simpler. Some people think the SBA provides loans directly to small business owners. It does not, it works with other institutions. Others believe they will not have to pay the loans back because they are provided by the government. That’s also not true.
The last two myths are the hardest to believe. The first is that you don’t need collateral for guaranteed loans. That’s not the case. Loans are typically only approved with collateral. The second is that they come with high fees. That is the opposite of the fact. SBA loans are among the most affordable instruments available to the businesses that qualify for them. You usually won’t find a better rate on small business loans without the kind of credit history and resources that would move you out of the small business class.