Difference between Bank Loans, SBA, and Private Lending

For most entrepreneurs, a bank loan is the first thing that they think about when they want to borrow money. However, getting a bank loan is not as easy as it once was. Banks are approving less and less applicants every year which leaves more and more small businesses without a source of working capital. Not to mention, bank loans may also include balloon payments at the end of the term and shorter repayment periods, which are not ideal, especially for start-ups. What, then, are your other options? Here, we will talk about your two other options for small businesses: SBA loans and private lending.

2. Small Business Administration (SBA) Loans

The SBA offers a variety of loan programs to meet the different financial needs for a variety of business types. A benefit of an SBA loan is a government guarantee that usually covers about 75% of the loan, which reduces the lender’s risk. However, the government does not lend directly to the small business, but rather set guidelines for loans made by its accredited partners, like micro lending institutions, bank, and community development organizations.

However, borrowers must consider the major disadvantages of applying for an SBA loan such as the extra fees, a long wait for approval, and lots of paperwork. The approval rate for an SBA loan is low as well. Applicants must have a personal credit of 750 and above, and cannot have bankruptcies, tax liens, or judgments ever in their credit history.

Many borrowers have experienced the long, drawn-out process of applying and paying extravagant fees for a conventional bank or SBA loan, only to get declined or offered an inferior loan to what was asked for.

3. Private Lending

With all the doors being shut on business owners, this third type of loan is very attractive to small business owners.

A huge plus of private lenders is that they tend to give out loans to businesses that a typical bank would pass up on, and provide a quicker decision making process. Private lenders tend to have a transparent working process where borrowers will know what the terms and rates are right away. Because of that, business owners are apt to have a more personal relationship with the lender.

Infuze Funding: We are your solution! Whether you have perfect credit or have a few blemishes, we have programs for you. Here at Infuze Funding, we provide competitive loans through different programs to provide you the right kind of funding for your business. Apply now or contact us today and find out how we can help your business.