What are SBA and Term Loans?

A traditional term loan, or an SBA loan, is a lump sum of cash you pay back with regular payments, plus interest, over a fixed period of time, generally amortized. A mortgage is the best known example of a term loan. A longer term allows for lower payments, which allows for a higher capital injection.

SBA loans are government backed, and therefore are longer approval times, and lower interest rates.

This could be real estate, equipment or machinery, expansion capital, funding the purchase of another business, disaster recovery or even, in some cases, refinancing other debts.

A term loan is probably the most common form of business loan. Borrow a lump sum of money—usually for a specific purchase you’re making for your business—and pay the loan back over a set term, most often at a fixed interest rate, on a standard amortization schedule.

Is It for Me?

Term loans are meant for one-time purchases and upgrades, like buying buildings, IT upgrades or equipment purchases, as well as refinancing current debt into easily-manageable set monthly payments.  Despite their low cost and larger amount of cash influx, they are not meant to be used for working capital.  Unless there is a specific need, less available money through a credit line is always going to be better then a better solution, since you will only pay for the capital that is drawn, and whenever the need arises, cycle the money.

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Features of Term Loan

Maximum Cash In Hand


Loan Terms

– SBA and Traditional loans at 10 years
– Mortgages up to 30 years

Cost to Capital

APR from 4.5% to 9%. Over the entire term, which may be up to 30 years, expect to pay about $1.20-$1.50 for every dollar borrowed.


Larger term loans, especially SBA loans, may take from 45-90 days to underwrite and complete.


Extremely lengthy underwriting process

Loans above $350,000 will need sufficient collateral

SBAs have variable interest rates

Personal Guarantor's FICO important


Monthly repayment schedule

Terms up to 30 years

Lower interest rates

May have no Prepayment Penalties

What Do I Need to Qualify?

At least 2 Years Time in Business
2 Years of Business Taxes Returns
2 Years of Personal Tax Returns
A/R Report
Year to Date Financial Statements – P&L and Balance Sheet
Personal Financial Statement
Debt Schedule

These are FULL DOC loans.

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