Last October the Small Business Administration removed fees on SBA-guaranteed loans under $150,000. Although last year’s average SBA loan was closer to $380,000 and the year before was around $327,000, it might be interesting to note that before the financial meltdown in 2008, the average SBA loan amount was closer to $175,000—more in line with the needs of Main Street—or the smallest small businesses rather than the biggest small businesses.
The typical SBA loan process is cumbersome and often disappointing for small business owners who slog through the documentation, wade through months of back and forth, and ultimately discover they don’t qualify for the loan they’re seeking—not because it’s too much, but often because it’s too little and too expensive for most financial institutions to bother with.
There are instances when a merchant cash advance or a credit card is the perfect solution for a small business borrower; unfortunately for many business owners this type of funding is the only credit available to them right now. Potential borrowers do need to qualify for an SBA loan, so this isn’t for everyone. However, this can be powerful motivation for small business owners who might be on the edge to get their financial house in order because a low-interest, SBA-backed loan, isn’t out of reach if they’re looking for the cash to purchase something a new, or fill dozens of other growth-related cash flow needs.