Conventional Business Loans vs. SBA Loans

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Editor’s note: Lantern by SoFi seeks to provide content that is objective, independent and accurate. Writers are separate from our business operation and do not receive direct compensation from advertisers or partners. Read more about our Editorial Guidelines and How We Make Money.
What Is a Conventional Business Loan?
How Does Conventional Lending Work?
What Are SBA Loans?
How SBA Loans Work
Your business must qualify as a small business, as the SBA defines it. Your business must be for-profit. You must do business in the U.S. You personally must have invested equity into your business. You must have used other sources of financing, including personal assets. You must be able to demonstrate a need for the funds. You must use the funds for business purposes.
7 Key Differences Between SBA vs Conventional Business Loans
1. Loan Terms
2. Business Loan Collateral
3. Loan Flexibility
4. Loan Rates
5. Loan Requirements
6. Loan Approval Process
How Complicated the Approval Process Is
Approval Times
7. Maximum Loan Amount
Pros and Cons of Conventional Business Loans
Pros of Conventional Loans
Low interest rates Large loan amounts Competitive repayment terms Application process is less cumbersome than SBA loans Faster funding time than SBA loans
Cons of Conventional Loans
Strict eligibility requirements Slower to fund than online loans More paperwork than online loans May require specific collateral May require a personal guarantee
Pros and Cons of SBA Loans
Pros of SBA Loans
Broad eligibility requirements Low interest rates Long repayment terms High loan amounts Resource centers available to provide general business assistance
Cons of SBA Loans
Slow approval and funding process Typically requires a down payment Collateral could be required May need to sign a personal guarantee Low-credit applicants are typically not approved
How to Choose Between Conventional Business Loans and SBA Loans
Small Business Loan Rates
Frequently Asked Questions
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About the Author
Su Guillory is a freelance business writer and expat coach. She’s written several business books and has been published on sites including Forbes, AllBusiness, and SoFi. She writes about business and personal credit, financial strategies, loans, and credit cards.
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