One requirement for a small business to qualify for an Small Business Administration (SBA) loan is to have good annual revenue. Majority of small businesses that get an SBA loan earn $250,000 or more per year. But, to some entrepreneurs, that concept doesn’t make sense. Here’s a question that often comes into your mind that if a small business is making that much money, why would they need to get a loan?
It appears contrary to common sense to get small business debt, however there are several reasons to look for funding when your small business is flourishing. Here are a number of ways an SBA loan can help the growth of your small business.
- Debt Refinancing
One of the frequent uses for an SBA loan is to pay off existing high-interest debt. Business owners usually acquire expensive debt when launching a business. Without a strong business credit, business owners might turn to a line of credit, credit card or an alternative lender with high interest rates and short repayment terms. Some types of loans even need daily payments. This sort of debt can ruin cash flow and bring adversity for a small business. Only a single interest percentage point, even less, can save you lots of cash every year—money you can reinvest to support expansion. When you’ve been in business for a couple of years and built up your credit score, funding is quite affordable. In case you meet the grade, an SBA loan is a great option to help remove debt and increase cash flow.
- Purchase Equipment
From computers to vehicles, small businesses need equipments to run effectively. SBA loan can help finance those expensive things. For instance, your business need some workstations to add more workers in your business, you can get the SBA loan to finance that purchase. With almost 10-year terms and low rates, an SBA loan can be much more affordable compared to other options.
- Stock Up on Inventory
With an SBA loan, most small businesses can stock up their inventory for the busy season. Similarly to having inventory accessible when needed, small business owners can save a lot by shopping in large quantities. Having cash available is a difference maker.
- Hire New Talent
If it’s time for your business to bring in some new fresh talent, a small business loan can help cover all costs related to hiring like, salary and benefits and other charges associated with hiring. Without sufficient cash available, it is probably impossible to bring in new workers that allow you to expand your business. Check your business plan to find out if funding can help finance new hiring.
- Refinance And Purchase Real Estate
An SBA 7(a) loan with 25-year terms and low interest rates is a superb option for small businesses looking to refinance an existing business, real estate loan or purchase an owner-occupied industrial area. In conjunction with the refinance of the property, the SBA loan proceeds have been used to refinance current small business debt. This strengthens the cash flow, placing the small business in a stronger financial place.
- Get Working Capital
Working capital is the difference between the current assets and current liabilities. It can be a positive or negative amount. Working capital are funds available to pay a business’ current debts. An SBA loan can be used for working capital that can then be used many purposes like paying taxes and coping with unexpected costs.
An SBA loan can be a best funding solution to help you reach your entrepreneurial goals and expand your small business.