3 Reasons to Apply for an SBA Loan for Your Business

As consumer confidence increases, small businesses are enjoying the opportunities caused by the resurgence in economic growth. It’s remarkable that Utah and Idaho are the only two states that experienced job gains over the last two years — a testament to the strength of their small business communities.

As companies adapt to the rebounding economy, it’s critical for business owners to evaluate their financing needs. Helen Johnson, Community Banking relationship Manager for Zions Bank, shares her insights on the 3 most compelling reasons to apply for a U.S. Small Business Administration loan through Zions Bank.

Reason #1 to apply for an SBA loan: They are easier to obtain for startups and early stage companies

The SBA is a federal agency dedicated to small businesses. Under normal circumstances they do not lend directly to entrepreneurs, but rather guarantee a certain percentage of each loan. This SBA guarantee benefits borrowers in many ways.

“The SBA guarantee opens doors for startups and early stage businesses to obtain financing,” explains Johnson. “Because the SBA will repay a portion of the loan if the borrower defaults, it allows banks to extend financing to businesses that might not otherwise qualify.”  

Reason #2 to apply for an SBA loan: They are a versatile source of financing

An SBA loan can meet a wide variety of financial demands that include startup costs, working capital or fixed assets. Two of the most common SBA loans include the 7(a) and 504 loan.

With the 7(a) loan, entrepreneurs may borrow up to $5 million for uses that typically include business acquisitions, expansions, startups, inventory, equipment or working capital.   

“If you need a versatile, general purpose loan, the 7(a) is likely your best choice,” says Johnson. “It offers between 5 to 25 year fully amortized loans that allows a startup or early stage company to obtain the type of financing that is typically reserved for mature businesses.”

The SBA 504 loan may be used to purchase an existing building, invest in machinery and equipment, construct a building or finance improvements to existing facilities. The SBA portion of a 504 loan is capped between $5 to $5.5 million, but there is no limit to the total project cost if the borrower passes the SBA’s eligibility criteria.

“For a 504 loan, the borrower can provide as little as 10% down for the project, with the remainder split between the bank and a Certified Development Company,” says Johnson. “This loan also allows closing costs and soft costs, such as architectural or permit fees, to be rolled into the loan instead of paid out of pocket — a substantial benefit for small business owners.” 

Reason #3 to apply for an SBA loan: They offer competitive advantages

Because of their government backing, Zions Bank can offer SBA loans at competitive rates with fees comparable to non-guaranteed loans. The SBA also sets a maximum interest rate it considers affordable for a business loan, which is influenced by the prime rate, loan size, term and situational factors such as the borrower’s industry and personal credit. 

“Cash management is critical for small businesses,” says Johnson. “A low down payment requirement, flexible terms and competitive interest rates allow small business owners to save thousands of dollars over the long run.” 

You can apply for an SBA loan online¹ anytime or visit a local Zions Bank branch to learn more. As a top provider of SBA loans in Idaho and Utah² and an SBA preferred lender,  Zions Bank’s team of relationship managers can help you find the right SBA loan for your business. 

1. Loans subject to credit approval and SBA approval. Terms and conditions apply. See a banker for details.

2. Based on U.S. Small Business Administration data.