Updated: Feb 15
Research over the last 10 years suggests that about 1 in 5 small business owners qualify for SBA loans. Yet, when it comes to loans, small business owners are primarily interested in an SBA loan. In a series of blogs, we explore SBA loans and what small business owners can do to get qualified.
By Thomas W. Tramaglini, Managing Director at BRP Onesta
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For years, BRP Onesta has originated millions of dollars in SBA loans for small businesses. Clients and prospects almost always request SBA loans when seeking funding for their business. Yet, while the small business owners we interact with want an SBA loan, the majority of our interactions yield that they know little about SBA loans.
Why are SBA loans so sexy?
What is so attractive about an SBA loan? Two reasons are that they carry low interest rates and have long terms. Small business owners can use loan proceeds for a host of purposes (equipment, machinery, buildings or working capital). So, when a loan has some of the attributes I listed, of course SBA loans would be the first choice.
What is an SBA Loan?
Although I will spend some time to do a bit deeper of a dive on the subject in future blog posts, it is important to describe what an SBA loan is. Also, for the purposes of this blog I will NOT include Economic Injury Disaster Loans (EIDL) or Payroll Protection Program (PPP) loans in the context of my description. An SBA loan is a loan (from an approved SBA lender) which the majority of the loan is guaranteed by the U.S. Small Business Administration. Guidelines for these lenders to use for SBA loan programs are set by the SBA and once an SBA loan is approved by the bank, it is sent to the SBA for their review and approval.
Most Small Business Owners Do Not Qualify for SBA Loans
Indeed, SBA loans are sexy to many small business owners. Yet, a small number of small business owners get funded with an SBA loan. One dataset and report that I love to comb through comes from Fed Small Business, a workgroup coming from the 12 Federal Reserve Banks and small business partners (about) (Small Business Credit Survey). Each year, the group conducts a survey of small business owners from all 50 states. Questions vary from borrowing to organizational health. Results provide a generalizable set of data for researchers to paint a picture of the status of small businesses. In laypersons terms, their survey is a measuring stick of that describes different aspects of small business health in the United States with approximately 90% accuracy.
In the last SBCS survey that provided an accurate description of small businesses and SBA loans, around 1 in 5 businesses were able to secure SBA loans as compared to other sources of borrowing capital. Considering how sexy SBA loans are to small business owners it is disheartening and eye-opening that such a low number of small business owners actually can secure such funding.
Small Business Owners Need to Know More About SBA Loans
Clearly, there is a disconnect of some type considering the high percentage of small business owners who tell us they want SBA loans but in reality, qualify for one. So, we decided to write a series of small business blog posts that address this gap. We aim at better educating small business owners and provide ways that small business owners can prepare for applying for an SBA loan. The focus will be to answer many of the questions that we are asked each day at BRP Onesta.
Some of the topics that we will explore will include:
What types of SBA loans are there?
Are SBA loans forgivable?
Where to apply for an SBA loan?
How do small businesses qualify for an SBA loan?
What is the SBA loan process?
What options are there for small business owners who do not qualify for an SBA loan?
How can the typical small business owner get pre-approved for an SBA loan and what pitfalls they should avoid?
Is There Hope?
Yes, of course there is hope. Up front, no, all small business owners will not qualify for an SBA loan. However, while only 1 in 5 small businesses seem to be able to qualify for an SBA loan, with support organizations like ours (www.backofficedepot.com), our ratio is much higher. From January 2016 – present, about 62% of our clients were able to qualify for SBA loans after work we did to support their application process and applying at the right bank. The bottom line is that in 2020 the SBA reported that there were 31.7 million small businesses in the United States and there is plenty of funding out there for small businesses to use to grow their brand, their products, services, and their customer base and we want to help small businesses find their way forward with the best possible margins.
Do you want to apply for an SBA loan? Do you think you are ready to qualify now? Do you want to find out if you can get pre-approved for an SBA loan before you apply?
If you answered YES to any of these questions, please contact our team at any time for a free, no-obligation phone consultation with one of our specialists. We will set up a time with you and go over what you are looking for, what we think you can qualify for, and what we can do to get you to the finish line.
We also have a host of small business funding opportunities, from equipment loans to small business grants which we keep updated each week (click here)
Dr. Thomas W. Tramaglini is the Managing Director for BRP Onesta, a company that supports small businesses. By offering a host of important and affordable services that small business owners tend to not have time to do themselves, the team at BRP Onesta can help small businesses grow. BRP Onesta serves clients in all 50 states, Puerto Rico, Mexico and Canada.