SBA loans are loans for small businesses that come from outside of a traditional bank. The SBA 504 loan in particular is designed to act as a fixed interest loan, which allows a small business to establish or expand itself. This, as a small business does for any community, will create a positive ripple effect, and help the local economy thrive.

Small business lending has a tendency to be intimidating, leaving people with many different questions. Here are three common questions that business owners have in regards to an SBA loan.

How Big Are SBA Loans?

Most SBA loans are going to be in the low six figures. For instance, the average SBA loan in 2018 was $107,000. Of course, this varies by an individual business’s needs. For instance, one business may need to have enough money to purchase land, construct a building, purchase inventory or supplies, and much more. That business would likely need a far larger loan. However, plenty of small businesses need less capital and therefore smaller loans. In other words, small business loans are unique to the individual business.

Why Do Small Businesses Get Loans?

There are several reasons that small businesses seek out loans. Oftentimes, this is one of the first things that new business owners go about doing because they need capital to get their business off the ground. However, this isn’t the only reason to get an SBA 504 loan. For one, SBA loans offer greater flexibility for a company. If your business has stagnated, a loan can offer the funding you need to make an investment that benefits its long-term future. Even if you’re not interested in expanding your small business, an SBA loan can be used for something like advertising, which will then help to increase revenue.

What Makes SBA 504 Loan Unique?

The key difference between an SBA 504 loan and a traditional loan is in who owns it. Traditionally, an SBA loan is between the small business owner and the bank. In the case of SBA 504 loans, it is owned by three parties: the business owner and the bank still, but also a third party is known as a Certified Development Company. These are often non-profit companies whose goal is to help small businesses. This means that they are able to help create beneficial terms on the loan, such as a fixed rate.

Small businesses are the backbone of local economies, but they’re often more vulnerable than large corporations. After all, a large corporation has much more capital, and its brand makes it safer to invest within, which is why SBA loans are so important. They make operating a small business much more manageable, which leads to more local jobs and spending.

Let Lewis & Clark Development Group Help You

Learn more about SBA loans and how LCD Group can help you. Contact Tracy Whitney today at (701) 667-7602 or by emailing him at tracy@lcdgroup.org. Also, click here to visit our business loans page.