Why SBA Loans Differ from Conventional Loans


    Three Brothers Bakery was founded by three brothers who endured the Holocaust, and has since survived four floods, a hurricane and a fire in recent years. Janice Jucker, a co-owner of the Houston-based bakery, said Three Brothers Bakery wouldn’t exist without the Small Business Administration (SBA).

    “Our story is one of survival, and part of that survival has been the SBA loan program,” she said.

    The company received two disaster-relief loans and recently got approved for a 7(a) loan through a local bank’s SBA program. The relief loans bridged the company until its insurance payments kicked in, and the 7(a) loan is going to build the business a new location on higher ground.

    There’s a loan out there for every type of business, even those that don’t have the track record or credit to get approved from a conventional bank. The SBA makes sure of this, incentivizing conventional lenders to provide funds through its 7(a) and 504 loan programs to businesses that otherwise would have been rejected.

    It pushes lenders to consider questionable loan applicants by backing between 75 and 90 percent of the small business’s loan. And unlike quick-hit alternative online lenders, the SBA program’s rates are low – hovering around WSJ Prime plus 2.75 percent.

    The SBA provided around $25 billion in guarantees last year, according to Dianna Seaborn, director of the office of financial assistance in the SBA’s Office of Capital Access.

    “We provide that guarantee that allows [lenders] to be more generous in their terms,” she said. “That generosity helps the small business in cash flow and repayment terms – it helps them to get financing when they’re startup businesses.”

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    Read more: https://www.businessnewsdaily.com/11004-sba-loans-vs-conventional-loans.html


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