Capital / Cash Management

Demystifying the Small Business Administration

When confidence in the economy is on the rise, many CEOs and business owners start thinking about investing in and growing their business. The big question is how to access capital. One solution to include in your company’s small business growth strategies should be the Small Business Administration.

But many rarely consider the SBA. A recent Vistage Research survey of CEOs and small business owners found that while 51 percent of respondents planned on increasing investments in 2017, 65 percent said they’ve never used a SBA loan and haven’t considered taking one out.

Why? Mainly because of all the popular misconceptions out there: “The application process is too complex.” “The SBA is only for small businesses.” “The SBA won’t loan money for real estate purchases.”

Our report, Demystifying the Small Business Administration, dispels some of these misconceptions, outlines the benefits of the SBA loan program, and offers tips on navigating the application process. It also helps define qualifying expenditures and purchases, and explores the program’s rates and terms. Learning more about the SBA could be the shot in the arm your small business growth strategies need.

Here are a few key takeaways:

Debunking the SBA

Businesses of varying sizes are eligible for SBA loans up to $5 million. In fact, SBA’s Table of Small Business Size Standards lists several businesses with annual receipts exceeding $20 million with more than 1,000 employees on staff.

SBA loans offer lower rates and longer terms

Go the online lending route and you could end up “paying 30 percent to 40 percent APR” on that loan, says Bob Coleman, a California-based expert on small business loans and owner of Coleman Publishing. But SBA loans are tied to prime, meaning cheaper interest expenses. You can also stretch out the loan’s amortization period to 10 years.

How does this help with real estate? “If there’s real estate involved, they’ll give you 25 years,” says Ami Kassar, CEO of MultiFunding, a Pennsylvania-based business advisory company that works with lenders.

Understanding the process

Let’s get this out of the way. Yes, SBA loans are known for having more paperwork that a conventional loan. So be prepared and persistent. Applicants who focus on details and deadlines are more likely to get a speedy response.

CEOs and business owners who may have written off the SBA loan program should reconsider adding it to their small business growth strategies. With lower interest rates and longer terms, a second look at the SBA could reveal a valuable resource for accessing capital.

Read more on small business.

Vistage for Small business leaders

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Category: Capital / Cash Management

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About the Author: Joe Galvin

Joe Galvin is the Chief Research Officer for Vistage Worldwide. Vistage members receive the most credible, data-driven and actionable thought leadership on the strategic issues facing CEOs. Through collaboration with the Vistage community of…

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