Business Guides

5 Ways the SBA Can Help With Debt Financing

Last updated on May 7, 2021

Jacques Famy Jr

Companies can choose from a variety of sources when it comes to debt financing, and the Small Business Administration, or SBA, happens to be a great resource for finding and securing financing. Debt financing is used when a company borrows money then pays it back with interest. There are various types of debt financing available, including cash flow loans, business lines of credit, and invoice financing. Depending on what kind of business you operate, debt financing might be a good choice. This article will explore five ways the SBA can help with debt financing, including:

  • Business loan assistance
  • Loan programs
  • Better interest rates
  • Disaster relief
  • Specific business help

What is Debt Financing?

Debt financing is the type of financing in which a business borrows money then pays it back with interest. Many small business owners first compare debt financing and equity financing, which involves selling a stake in your company to investors who will share your business’s future profits. Many companies choose debt financing over equity financing because they can maintain control over their company.

The various types and structures of debt financing allow for flexibility so that businesses can choose the model that works best for them. The three different types of financing, which include business term loans, cash flow loans, and business lines of credit, make debt financing an excellent choice for any small business. Cash flow loans include merchant cash advances, business cash advances, and invoice financing.

How Can the SBA Help With Debt Financing?

This article will explore five ways the SBA can help with debt financing. Using the SBA as a resource can be advantageous for many small business owners. They can help secure business loans, offer disaster relief, and give special help to minorities and other specific groups who are business owners. Starting and running a business is hard work. It’s always okay to ask for help, especially when you consider the SBA and how many resources are available to small business owners of all kinds. Read on to find out more about how the SBA can help with debt financing.

Business Loan Assistance

It’s a common misconception that the SBA lends money. They are actually not the lender but rather a federal entity that offers guarantee lenders that you can use if you qualify. You don’t need to be turned down by two banks to get help from the SBA with a business loan, either. They provide loan guarantees to lenders, acting like a cosigner to help you qualify for those crucial business loans. In this way, the SBA helps with debt financing by working as a valuable resource for finding and securing small business loans.

The process for accessing business loan assistance is straightforward. You can go to any lender and see if they work with the SBA, or you can get help from the SBA to connect with lenders. Securing an SBA loan guarantee might involve more time and paperwork, but it’s worth it. In many cases, having the SBA on your side is the difference between getting a loan and getting let down. It’s easy to connect with SBA lenders through their Linc program once you register and answer a few simple questions.

Loan Programs

Small business owners can take advantage of the various loan programs offered by the SBA. They are an excellent way for your business to get the funding it needs, especially because they come in so many different forms and structures. Some of the most popular programs include the Basic 7(a) loan to help both startups and existing businesses, and the 504 program which focuses on major purchases of fixed assets, such as land, equipment, and real estate.

It can sometimes be challenging to get approved for SBA programs because many have strict requirements for qualifying. If you fail to qualify for an SBA loan, we have tips for managing SBA loan denial. Here are some of the most popular SBA loan programs, which are continually being updated and changed to better serve businesses:

  • Basic 7(a) loan: the most common SBA loan made for startups and small businesses. They can be used for a variety of purposes with debt financing solutions up to $5 million.
  • 504 “Go” loan: for significant purchases like property and equipment in development areas. The loans can be up to $5 million with longer repayment terms of up to 20 years.
  • Microloan program: gives smaller amounts of funding to young businesses that need help in the early stages. Loans range between $500-$50,000.
  • Other particular loans: the SBA also has other specific loans for people who meet certain requirements. There are loans for veterans and export loans, among others.

Better Interest Rates

When the SBA acts as a guarantor for your business loan, or when you qualify for one of their loan programs, you will usually be rewarded with better interest rates. Because the SBA is so well-known and trusted, having their backing can mean great things for your small business. Securing a loan with great interest rates is just the start.

Disaster Relief

One of the SBA’s primary functions is to help small businesses that are hit by disaster. Whether your business is suffering after a natural disaster, physical damage, or economic injury, assistance from the SBA may be available. There are loans for self-employed business owners who have lost their job because of a disaster, and tax relief assistance to help prepare tax returns in the year the disaster occurred. Many disasters can’t be predicted, like severe weather and pandemics that shut the economy down. Thankfully the SBA exists to provide a safety net for businesses experiencing significant losses due to disaster.

Specific Business Help

The SBA offers specific help to businesses owned by certain groups, including veterans, women, minorities, disabled people, and immigrants. If you are a business owner and fall into one of these categories, it’s a great idea to research what kind of focused assistance the SBA offers.

Resources from the SBA

There are so many ways the SBA can help with debt financing for small businesses and startups. Through business loan assistance, help finding the best interest rates, and loan programs, there’s an opportunity for every company out there to take advantage of. Other programs offered by the SBA, such as disaster relief and specific help for minority and women-owned businesses, make them one of the best resources for small businesses.

* All loans made by either WebBank, an FDIC-insured Utah industrial bank, or Bank of the Internet Federal Bank, an FDIC-insured federally chartered thrift located in California. In connection with the loans, the Banks' underwriting conditions and terms apply.