SBA loans are long-term and affordable small business loans offered by banksâbut partially guaranteed by the government.
The United States Small Business Administration has several different SBA loan programs that you can use for working capital, inventory and equipment purchases, debt refinancing, real estate purchases, and business acquisition costs.
The Small Business Administration helps entrepreneurs improve their small businesses, take advantage of different contracting jobs, and access small business financing. SBA loans fall into the third category.
One big misconception about the SBA: the federal agency lends cash to businesses itself. Thatâs generally not true. Instead, SBA loans are funded by banks that participate in SBA financing. The SBA guarantees a percentage of those bank loans using federal money, however, to give banks more incentive to lend to small businesses.
In other words, the SBA backs up a part of the bankâs loan, which means theyâre taking on less risk while you still get large, low interest rate loans.