Possibly he has taken the benefits of the “contracts” and secured the cutthroat deals with the government. Or the scenario may go with SBA “counseling” meetings, courses, or events. But it’s not revealed to everyone that SBA loans include some of the largest and lowest cost loans in the small business industry. If you’re talking about capital, the SBA is the emperor that rules small business lending. There are a handful of things you need to know about the SBA.

• The SBA, despite being the leading discoverer of cheaper business financing, does not provide the loan itself.

• It is a very common and fashionable misconception that the SBA is a lender, but what the federal administration does is a bit more complex.
• In the name of lending the funds directly to your business, the SBA joins the lenders and expedites the process of arranging your financing. The government insures 75-85% of your loans, so if you can’t pay more, lenders won’t see a major loss.

• In general, the SBA encourages the lender to make you bigger and more affordable loans by reducing the risk factor. If you have financing, they charge interest or, if you stop paying, they lose the minimum.

Now, a question should arise in everyone’s mind, why doesn’t the SBA give the loan itself? Basically, there are two main reasons behind this.

By going from guaranteeing the loans to making them, the budget will be much larger. The SBA loan will become more expensive, much larger, needing a much larger amount not only to make the loans, but also to appoint employees and many more additional expenses.

In short, the SBA commits bank loans to find a solution to the credit availability problem and lending the money itself may increase as vulnerability. Typically 80% of business owners are turned down by the banking authority for the loan application, securing $20 billion each year SBA greatly fosters small business development throughout the United States.

The SBA loan is mainly 2 categories when it comes to small businesses.

7(a) loan program:
This is in fact the largest and most popular loan provided by the SBA. You can use these funds for anything. Whether it’s seasonal financing, operating expenses or real estate deals. Depending on your needs, you can take a loan of a minimum of $5 million, whereas in 2015, the average was $400,000. These loans last between 7 and 25 years and you must pay them monthly with a bank interest of 6 to 13%.

CDC/504 Loan Program:
The largest and cheapest SBA loan can be used to purchase large fixed assets such as real estate or any equipment. 10-20 years will be provided to repay the loan at 5-6% interest and 3% up front.