While the Coronavirus pandemic in full swing, the United States President Donald Trump announced an estimated $50 billion in emergency relief funding for small business owners via the Small Business Administration (SBA). The reason for this funding announcement is to assist struggling small businesses that have been affected by the coronavirus pandemic. While the details about the availability of SBA funding are yet to come out, there are few important considerations you should consider when applying for SBA loans. Here are a few things you should know when applying for SBA loans, as well as the funding alternatives to assess the best way to secure the capital your business needs.

SBA Loans

The SBA offers a variety of business loans and resources for small businesses including disaster loans for businesses to recover from natural disasters like Coronavirus (COVID-19), funding for export businesses, women-owned businesses, minority-owned businesses, and veteran-owned businesses. The most popular SBA loan programs include the following:

  1. SBA 7(a) Loans– With SBA 7(a) loans, you can get cash up to $5 million to be used for any purpose including for working capital, equipment purchase, refinance existing debts, and buy real estate. The SBA 7(a) loans are typically for established businesses and not for startups.
  2. SBA Express Loans– With SBA Express loans, you can get cash up to $350,000 with the quick approval process and a decision within 36 hours. These loans carry high-interest rates than 7(a) loans and may take few weeks or a month depending on the actual lender to approve the loan.
  3. SBA MicroloansSBA Microloans offer cash up to $50,000. As the name suggests these are smaller loans and are offered by community lenders and nonprofits. The approval process is quicker and these loans can be used for startups, buy equipment or inventory and working capital for established businesses.

SBA Loan Requirements

The SBA loan process is similar to regular business loans but the requirements vary based on the SBA loans and the lenders. Keep in mind that the SBA does not directly lend the money.  Instead, they guarantee repayment from an SBA-approved lender.

Generally, the SBA lender requires the following along with an SBA loan application to make a decision:

  • Resumes of company management
  • Solid business plan
  • Excellent credit score
  • Sales expectations
  • Business debt schedule
  • Competitors analysis
  • Business Certificate/License
  • Plan on how you will use the loan
  • Current financial statements
  • Personal and business income tax returns for the past three years
  • Collateral and personal guarantee for the loan
  • Legal documents

SBA Loan Considerations

Before you decide to apply for SBA loans, consider how the loan process works and the loan terms. If you’re unable to repay the loan, you could end up paying a lot more money than you initially anticipated. The repayment schedules for SBA loans are typically longer and based on how you’ll plan to use the money. Here is the repayment schedule for SBA loans based on your needs:

  • For short-term needs, the repayment schedule is seven years
  • For equipment purchase, the repayment schedule is 10-years
  • For real estate financing, the repayment schedule is up to 25 years

The opportunity to use the longer repayment terms can be a mixed blessing for cash-strapped businesses. Taking more time to repay a loan means you’ll end up paying more over the term of the loan. Moreover. even if you’re able to secure low interest on an SBA loan, you could wind up paying more in interest costs.

How to Select an SBA Lender?

When deciding to apply for SBA loans, searching the right lender is important. Not every lender offers SBA loans, and of those who do, not offer the flexibility that you actually need. Therefore, it’s vital to carefully scrutinize lenders when assessing your SBA loan options.

Determine how many loan applications a lender typically receive annually on average, and how many of those get approved. In addition to their staff’s experience with SBA loans, you should also observe the maximum and minimum amounts they’re willing to approve.

When it comes to funding your small business, there are numerous business financing options, and you should not apply with the first lender you connect.

SBA Loan Qualification

SBA loans are the most sought-after loan products provided you’re able to qualify. With extensive paperwork and strict eligibility criteria, qualifying for SBA loans is really challenging. For startups, qualifying for SBA loans may not be the possible solution as some lenders are reluctant to offer money to businesses with no or little credit history. In addition, even if you have a profitable business but a low credit score, you might not be able to qualify for it.

The application process is also tedious and lengthy. After you submit a loan application, the lender typically takes weeks or months to make a decision. This might not be a suitable option if you need quick funding to cover an emergency or take advantage of time-sensitive growth opportunities.

Another essential aspect is the collateral or personal guarantee that you need to provide for SBA loans. This means putting up your valuable assets such as cars, property or accounts at risk to back up your business loan.

Pros and Cons of SBA Loans


  • Access to additional capital
  • Lower interest rates thanks to government backing
  • Multiple SBA loan options
  • Longer repayment schedules
  • Lower down payments
  • Access to SBA Resources


  • Longer application process
  • Relatively high interest-rates
  • Stringent requirements for borrowers
  • Typically require collateral or a personal guarantee
  • An excellent credit score is required

SBA Loan Alternatives

When it comes to small business financing, SBA loans are not your only option. There are many alternatives available to SBA loans that offer funding with quick access to capital. Here are some of the best alternatives to SBA loans.

  1. Business Lines of Credit

A business line of credit is the most popular form of business financing. It works similarly to a regular business loan, except that it provides revolving credit. With a business line of credit, you can borrow cash up to your approved credit limit and pay interest only on the amount you borrow from your credit limit, plus a withdrawal fee. A business line of credit generally has a higher credit limit than credit cards with an annual fee.

  1. Business Credit Cards

Business credit cards also provide quick access to revolving credit, where you can borrow cash to pay for things up to your approved credit limit. After using the cash, you’ll pay for the money you’ve borrowed on the card and your credit limit goes back up after payment. Business credit cards typically carry high-interest rates and might not be a suitable option when you need to carry a balance. You can avoid interest charges by paying your entire credit card bill by the due date.

  1. Crowdfunding

Crowdfunding is another great way to raise capital for your small business via individual investors. When raising capital for your business with crowdfunding campaigns, you have to offer investors something in return for their investment. For many, this could mean offering part of your business ownership or your products or services.

Crowdfunding is best for startups and new businesses that need to raise capital. Keep in mind that crowdfunding campaigns can take a lot of time, even months, to complete along with setting a specific funding goal. If you’re unable to meet your fundraising goal, you may have to return all the money you raised.

  1. Small Business Loans

Online small business loans from alternative lenders are the most suitable option when you need quick cash without a complicated application process. Online lenders, aka alternative lenders, offer easy and simple application process with a quick decision within 24 hours. With small business loans, you can secure capital up to $500,000, and funded within 24 hours, instead of days, weeks or months from an SBA loan.

The application process is simple with less restrictive requirements such as at least one year of time in business, $100,000 in annual business revenue and three months of bank statements. Another best thing about online business loans is that it helps build your credit score and borrowing history. If you secure smaller online loans, it could help you secure SBA loans in the future as well.

Pros and Cons of Alternative Lending


  • Fast loan approval and funding process
  • The easy loan application process
  • Straightforward requirements
  • No down payment or collateral needed
  • Secure financing even with no credit or subpar credit
  • Shorter repayment schedule to avoid debt faster
  • Funding in as quick as 24 hours
  • Use the funds however you see fit


  • Not for startups
  • No government backing
  • Some lenders may charge hidden fees

SBA Loans vs Alternative Lending Options

Choosing between SBA loans and online small business loans can sometimes be confusing. With lower interest rates, longer terms, and loan amounts, applying for SBA loans could be worth a shot. However, lengthy application processing time and stringent qualification requirements can make it difficult to get approved. Use due diligence and look for options that fit your business’s financial needs. With a range of financing options out there, you can make sure your business has the capital it needs to grow and succeed.

Small Business Financing News │ Merchant Advisors | blog
SBA Loans vs Alternative Lending: What to Consider in the Coronavirus Pandemic
SBA Loans vs Alternative Lending: What to Consider in the Coronavirus Pandemic
Looking for funding to fund your small business? The road ahead is full of twists and turns because it does require a lot of time and research to locate the best funding program that suits your business. Due to theRead more
Learn about SBA loans vs alternative lending options to get the capital your small business needs in the coronavirus pandemic.
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