Hidden Costs That Small Business Owners Should Be Aware Of

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When you start a small business, there are many expenses that most business owners don’t think about at first. These expenses, such as insurance, association fees and maintenance, can quickly add up, however. If you’re not prepared, you could easily watch your profits go out the door to pay for these business necessities. Sometimes, though, you simply don’t have the money to cover everything. In cases like these, you may find a loan helpful.

Is Your Business Eligible For a Loan?

The most common loan for small businesses is the 7(a) Loan Program. It comes from an authorized lender and is guaranteed by the Small Business Administration. Because of these, you may get a loan even if your business has less cash flow or a shorter credit history. In order to be eligible, your company has to work in the United States, be a small business according to the SBA and use your loan wisely. You also should be able to show why your business would benefit from receiving a loan. Sometimes there are special considerations for some businesses. It’s usually recommended that before applying, you read over the SBA guidelines to ensure your business is a good fit for this type of loan.

These loans have a variety of uses. The most common include securing long-term capital for operational expenses, securing short-term capital and purchasing equipment, real estate or inventory.

What Can You Expect the Terms to be?

There is no set minimum for a 7(a) loan and amounts can range up to $5 million. You’ll have monthly payments on this loan and your interest rate will be whatever you and your lender agree on. The terms vary depending on what channel you go through to get a loan. Many banks offer 7(a) loan programs , with the terms typically being seven years for capital, ten for equipment or inventory and twenty-five for real estate.

Seven (a) loans usually take about two to three months to process. Sometimes it takes longer if the loan is larger. Occasionally, this loan has a quick turnaround time, known as expedited turnaround. Under these conditions, you may hear from your lender within three days. To make this work for your small business, have everything ready before you apply and utilize the suggested business plan that the SBA usually provides. Make sure that you get requested information to your lender as quickly as possible as well.

Instead of being daunted by all the unseen costs that come with running your small business, plan ahead by looking into all of your options. You may find that a loan through the 7(a) loan program is what your business needs to cover some of those costs.

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