Signs It Is Time for Your Business to Consider SBA Lending
Is your company growing faster than you can financially keep up with? It might be time to consider SBA lending. Check out these signs.
Average Small Business Loans
Owning a business is an exciting adventure.
You get to be the boss. You get to make major decisions. You create something you can be proud of for use to come.
For some people, their business is their life.
When starting a business, or giving it a boost, you need money. Most small businesses turn to loans to keep the business going.
Almost any business owner can apply and receive an average small business loan. There are many types of small business loans from many different types of lending institutions.
Are you planning to take out an SBA loan for your business? Before you do so, learn the different loan amounts and types you can choose from to make a smart decision for your business.
In simple terms, a small business loan is a set amount of money that a business owner or co-owners borrow from a lender. Both parties sign a pre-set agreement specifying the amount lent and the interest that you'll pay back over a period of time.
From there, you can find many different types of business loans and loan agreements.
A loan many business owners desire is an SBA loan. The U.S. Small Business Administration works with lending providers to help offer loans for businesses. They don’t directly lend the money but work with banks, credit unions, and other lenders to offer safe business loans.
The SBA protects most lenders by covering up to 85% of a loan in case the borrower defaults. Lenders don’t need to worry about losing large sums of money. Business owners have the opportunity to receive loans at lower interest rates.
Receiving an SBA loan depends on your eligibility, such as business type, credit score, and business equity.
In 2018, the average small business loan amount was $663,000. That’s for all business loans regardless of loan type.
Depending on the amount you need for your business and what your lender offers can range from $13,000 to over $1.2 million.
However, different types of business loans have different average amounts. Here’s a breakdown of the different types of business loans out there and their average lending amounts.
As mentioned above, SBA loans help protect both the loan lender and the business owner. These loans are great for those who need money for larger business endeavors as they come in a large lump sum.
You can find different loan programs that work with SBA loans, such as the micro-loan and the popular 7(a) loan program
The average business loan amount through small business loans backed by the SBA in 2017 was around $107,000.
Short-term business loans are similar to bank loans but an alternative, non-bank lender lends them out. This type of loan is easier to receive than long-term or medium-term loans.
If you have a small idea you want to try with your business, a short-term loan is the smartest option. As the name suggests, they’re generally smaller amounts that you can repay in a shorter amount of time.
The average amount for a short-term business loan is around $20,000.
Similar to short-term loans, this type of loan comes from alternative lenders. They’re larger sums of money you can use over an extended amount of time, generally between 2-5 years.
An advantage of this loan is it has a set repayment timeline with regular payments. A business owner can take up to $500,000 with a medium-term loan. Your credit, revenue, and other factors will determine your eligibility for this loan.
The average loan amount is around $110,000.
This type of small business loan offers more flexibility than regular business loans. You can borrow up to a certain amount of money, but only pay interest on what you borrow. This flexibility allows you to use and repay amounts when you can and only pay interest on what you use.
Non-bank lenders offer business lines of credit. They are more accessible than traditional loans and are a great solution for those who need flexibility with a short-term loan.
The average business line of credit amount is $22,000.
Financing is another way to get funding for your business.
With Equipment financing, you receive loans designed to help you pay for expensive business equipment. You can receive a loan that covers up to 100% of the equipment’s cost that you’ll pay back with interest over a set amount of time.
Invoice financing is similar but helps pay for any outstanding business invoices. You can receive a loan of up to 85% of the invoice cost.
Since these loan types depend on the value of the equipment or invoices, there isn’t a hard and fast average. You’ll need to talk with your lending provider to find what works best for you.
Another factor that affects the amount of an average business loan is the lending provider.
Business owners who need a large business loan can find those at a large national bank. You should note, most small business owners will probably not qualify for larger loans. Most large banks won’t lend small loans which makes it challenging for small businesses to get a loan.
You’ll need a strong credit score, reliable finances, and have an established business. The average amount is around $564,000.
Smaller banks typically lend out smaller loans compared to larger banks. They are still higher loan amounts that most small businesses don’t need. These loans average around $185,000.
Alternative lenders offer a greater variety of loan types that businesses of all sizes can enjoy. You can get much smaller loans compared to what traditional banks offer. These lenders also can lend larger amounts, upwards of $1 million.
The average loan with an alternative lender is around $80,000. A good choice for smaller businesses that don’t need a large loan.
Ultimately, the amount of an average small business loan depends on your business endeavors. It’s safe to say most small business loans will be around or below $100,000 based on your business ideas and needs.
If you default on your small business loan the lender and the SBA will look to you to pay the debt based on the personal guarantee you will need to sign.
If you have debt from a business loan, or just want to learn more, let us know
Millions of Dollars in SBA Debts Resolved via Offer in Compromise and Negotiated Repayment Agreements without our Clients filing for Bankruptcy or Facing Home Foreclosure
Millions of Dollars in Treasury Debts Defended Against via AWG Hearings, Treasury Offset Program Resolution, Cross-servicing Disputes, Private Collection Agency Representation, Compromise Offers and Negotiated Repayment Agreements
Our Attorneys are Authorized by the Agency Practice Act to Represent Federal Debtors Nationwide before the SBA, The SBA Office of Hearings and Appeals, the Treasury Department, and the Bureau of Fiscal Service.
The client personally guaranteed an SBA 504 loan balance of $375,000. Debt had been cross-referred to the Treasury at the time we got involved with the case. We successfully had debt recalled to the SBA where we then presented an SBA OIC that was accepted for $58,000.
Client personally guaranteed an SBA 7(a) loan for $100,000 from the lender. The SBA loan went into early default in 2006 less than 12 months from disbursement. The SBA paid the 7(a) guaranty monies to the lender and subsequently acquired the deficiency balance of about $96,000, including the right to collect against the guarantor. However, the SBA sent the Official 60-Day Due Process Notice to the Client's defunct business address instead of his personal residence, which he never received. As a result, the debt was transferred to Treasury's Bureau of Fiscal Service where substantial collection fees were assessed, including accrued interest per the promissory note. Treasury eventually referred the debt to a Private Collection Agency (PCA) - Pioneer Credit Recovery, Inc. Pioneer sent a demand letter claiming a debt balance of almost $310,000 - a shocking 223% increase from the original loan amount assigned to the SBA. Client's social security disability benefits were seized through the Treasury Offset Program (TOP). Client hired the Firm to represent him as the debt continued to snowball despite seizure of his social security benefits and federal tax refunds as the involuntary payments were first applied to Treasury's collection fees, then to accrued interest with minimal allocation to the SBA principal balance.
We initially submitted a Cross-Servicing Dispute (CSD) challenging the referral of the debt to Treasury based on the defective notice sent to the defunct business address. Despite overwhelming evidence proving a violation of the Client's Due Process rights, the SBA still rejected the CSD. As a result, an Appeals Petition was filed with the SBA Office of Hearings & Appeals (OHA) Court challenging the SBA decision and its certification the debt was legally enforceable in the amount claimed. After several months of litigation before the SBA OHA Court, our Firm Attorney successfully negotiated an Offer in Compromise (OIC) Term Workout with the SBA Supervising Trial Attorney for $82,000 spread over a term of 74 months at a significantly reduced interest rate saving the Client an estimated $241,000 in Treasury collection fees, accrued interest (contract interest rate and Current Value of Funds Rate (CVFR)), and the PCA contingency fee.
Clients personally guaranteed an SBA 7(a) loan that was referred to the Department of Treasury for collection. Treasury claimed our clients owed over $220,000 once it added its statutory collection fees and interest. We were able to negotiate a significant reduction of the total claimed amount from $220,000 to $119,000, saving the clients over $100,000 by arguing for a waiver of the statutory 28%-30% administrative fees and costs.
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