If you’re a restaurant owner, chances are you’ve looked at a few loan options already and have seen the phrase, SBA. To put it simply, SBA stands for Small Business Administration and it’s a loan all restaurant owners should look into. However, despite being a “loan,” it’s not a loan in the way we understand them.
So, as a restaurant owner, an SBA is essentially a guarantee from either banks or certified lenders for a specific amount of money. In the case of an SBA, the money isn’t directly given to you. And this is done to protect lenders (since they’ll be the first paid back) in the unfortunate case of a default.
SBA loans allow for certified lenders and banks take risks on new and small restaurant owners; allowing for anyone who may not qualify for traditional loans get their restaurants up and running.
The Two Types Of SBA Loans
The first type of SBA is the 7a loan program. This one is used for revolving funds, equipment, working capital, and refinancing. The 7a loan is the most common of the two options for new or small restaurants.
As for the second type of SBA, there’s one known as CDC/504 (certified development company). The CDC/504 is for real estate as well as the physical restaurant location. It’s typically more useful for established businesses who are looking to expand.
Benefits Of A Small Business Loan For Your Restaurant. Pros and Cons.
Here Are The Pros Of A Small Business Loan For Your Restaurant
- They’re great for smaller restaurants that don’t qualify for bank loan.
- SInce SBAs are unsecured, it means no collateral.
- SBAs have smaller fees and offer more money than other options.
- Relatively low interest rates at 6% – 8%.
- Repayment periods can be anywhere from 10 – 25 years.
- SBAs are available for a wide variety of businesses, including small restaurants.
- There’s more than on options to fit your needs.
Here Are The Cons Of A Small Business Loan For Your Restaurant
- There’s quite a bit of documentation required during the SBA application process.
- Approval for an SBA can take anywhere between fourteen and sixty days.
- While they can be unsecured loans, not all places offer them without some form of collateral.
- There are specific guidelines you must meet in order to qualify for an SBA.
The Three Cs When Determining Whether You Qualify For An SBA Loan
To determine whether you’re qualified, Finance Factory looks at the Three Cs: Credit, Cash flow, and Collateral. They’ll look at any credit between 600 – 800, a minimum account balance of $1,000 – $5,000 for monthly cash flow (but also look at annual revenue), and will accept collateral as an option. However, You only need one of the three Cs to qualify for a loan – meaning as long as you fit the credit and cash flow qualifications, you will be able to get an unsecured loan.
Interested in finding funding for your business? Finance Factory would love to help! If you’re looking to fund your business within the next 30 to 90 days for $25,000 to $500,00 and have a credit score of 660 or better, let’s chat! Get pre-qualified right now with our quick-step pre-qualification form! And don’t worry, this will not result in a hard credit inquiry of sensitive information. We just want to learn more about you and your business. Click below to get started!