Paula ValenciaThe journey to becoming a small-business owner is challenging yet rewarding. Each stage of this endeavor has opportunities and obstacles — from planning and development to launch and expansion. Fortunately, there are valuable resources available to support and empower entrepreneurs along the way. When you’re ready to scale your business, a loan with support from […]
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The journey to becoming a small-business owner is challenging yet rewarding. Each stage of this endeavor has opportunities and obstacles — from planning and development to launch and expansion. Fortunately, there are valuable resources available to support and empower entrepreneurs along the way.
When you’re ready to scale your business, a loan with support from the U.S. Small Business Administration (SBA) could be the key to unlocking your next phase of growth.
Paula Valencia is assistant VP and SBA lending manager at Tompkins Community Bank, Central New York.
What are SBA loans?
At times, a bank wants to approve a loan that falls outside traditional credit requirements. For instance, a founder looking to buy a business may lack the necessary collateral to secure funding. This is where the SBA and its loan programs come into play. SBA loans can be used to finance a waste management company whose only available collateral is garbage bins, or a tech company where employees work from home and their assets are not physical. SBA loans, backed by the federal government, provide financing options for various business needs, including acquiring a company, expanding operations or launching a startup. Since these loans are supported by an agency specifically focused on helping entrepreneurs and small businesses, they offer significant advantages for borrowers and lenders compared to traditional business loans.Why are SBA loans the right choice for small-business owners?
If you have dedicated your time and money to building your business, registered it as a legal, for-profit entity, and are operating within the United States or in a U.S. territory, you’re likely eligible for an SBA loan. SBA loans’ eligibility requirements and terms and conditions are broader and more favorable than traditional loans because this funding is backed by the federal government and often include an SBA loan guarantee. This guarantee reduces the risk for lenders, allowing financial institutions to offer longer repayment terms — an advantage that makes these loans especially appealing to small-business owners. For small-business owners, this translates to lower monthly payments, more manageable debt, and extra cash flow to reinvest in your business. The flexibility of SBA loans can be a game-changer, helping you navigate the early stages of your venture, sustain growth and maintain financial stability — especially during periods of expansion or economic uncertainty. Beyond immediate funding, SBA loans can also lead to future financing opportunities. The security of an SBA guarantee means that even those with limited credit history or collateral can access capital. Successfully obtaining and repaying an SBA loan can also help to build your credit profile, improve your financial standing and make it easier to secure additional funding. In addition to financial support, SBA loans come with access to valuable resources designed to help entrepreneurs succeed. From career counseling and training programs to marketing strategies and operational guidance, organizations like the Small Business Development Centers (SBDC), SCORE, and local chambers of commerce offer expert assistance. If you’re unsure whether an SBA loan is the right fit for you, these resources can provide guidance and even assist with the application process.What types of SBA loans are available?
From $500 to $5 million, borrowers can acquire funding for various expenses — whether it be a small or large need. Most community banks offer the following types of SBA loans: • 7(a) Loans: SBA 7(a) Loans are the most common SBA loans and provide up to $5 million for working-capital expenses. This loan is a flexible-financing solution for business owners looking to grow their businesses, purchase new equipment, invest in real estate, or cover payroll expenses. • SBA Express Loans: SBA Express Loans offer up to $500,000 and have an expedited review process for quicker access to funds — these loans are typically approved within 36 hours. • 504 Loans: SBA 504 Loans support small-business expansions and modernization through long-term fixed-rate financing, providing up to $5.5 million in funding. These loans can be used for constructing or purchasing buildings, land, or large equipment or machinery. From starting your career to growing your startup or expanding your business, SBA loans provide the right mix of flexibility and support to help you achieve your goals.Paula Valencia is assistant VP and SBA lending manager at Tompkins Community Bank, Central New York.